Hong Kong and Singapore have long vied to be the premier hub of innovation in Asia. With cryptocurrencies and blockchain technology destined to play a key role in the next wave of financial innovation, where do Singapore and Hong Kong stand in this next-gen space? We decided to examine the regulatory and bitcoin company landscape in both locations to get a better idea.
Bitcoin Company Landscape
Singapore has a variety of digital currency companies including prominent exchanges, wallet services and payment processors. itBit originated in Singapore in 2013 and is currently the most widely used exchange in the city-state. Gocoin, a payment processor that allows online merchants to accept Bitcoin, Litecoin and Dogecoin, also hails from Singapore.
The Coin of Sale application was developed by Tomas Forgac in Singapore allowing brick and mortar shops to quickly accept bitcoin. BitX, which provides bitcoin products and services including wallets, exchanges, merchant integration and APIs to consumers, businesses and developers, announced in August it had raised USD $800,000 in seed funding from investors in New York, Palo Alto and London.
Singapore also now has eight bitcoin ATMs up and running, the first of which was installed by Singapore company Tembusu Terminals in March 2014. Tembusu have since been developing technology to integrate identity information directly into the signing process, allowing it to be visible to some parties while keeping it private to the general public.
In September, Bitfinex launched a service that turns hashing power into a “tradable commodity that can appeal to more investors.” This service is different than usual types of contract mining because exchange members will also have the opportunity to borrow and margin trade the new tradable asset, called TH1.
ANX released one of the first bitcoin debit cards, allowing customers to use bitcoin for online purchases and withdraw money from traditional ATM machines with increased ease. Speaking of ATMs, Robocoin put the world’s second bitcoin ATM in Hong Kong in January 2014, and the world’s first physical bitcoin store opened in Hong Kong on February 28, 2014.
State of Digital Currency Regulation
The Inland Revenue Authority of Singapore announced in January 2014 that, for tax purposes, it would treat bitcoin like a product, incurring taxes when it is sold for cash or used to pay for goods or services. However, if bitcoin is bought and sold as part of a long-term investment plan, that profit would be considered capital gain, which is not taxed in Singapore.
A couple of months later, the Monetary Authority of Singapore (MAS) announced its plans to regulate certain types of digital currency operators in Singapore; specifically those at the boundaries between cryptocurrencies and sovereign currencies. For example, digital currency exchanges and bitcoin ATMs or vending machines will need to verify their customers’ identities and report suspicious transactions. The aim is to curb the use of digital currency for money laundering and other illicit activities. The MAS will not regulate the acceptance of bitcoin by businesses, calling participation in such transactions a commercial decision in which the Authority should not intervene.
The juxtaposition of Hong Kong and China, with its porous shared financial border, has surely helped Hong Kong’s rise to prominence. Bitcoin activity in Hong Kong grew quickly after the People’s Bank of China placed restrictions on banks and other financial institutions on the mainland in their dealings with digital currency companies. This led to an influx of money and business from the mainland into Hong Kong businesses.
Interestingly, the Hong Kong government does not consider Bitcoin an electronic currency, and the Hong Kong Monetary Authority has stated it has no current plans to directly regulate Bitcoin companies. They may however choose to do so in the future, following the lead of the EU or US. Consumers and businesses are free to use Bitcoin as long as they pay relevant sales or personal taxes.
Hong Kong and Singapore share many similarities. Both have bitcoin-friendly governments that have welcomed digital currency companies and helped drive innovation across the space. However, though both Singapore and Hong Kong regulators have a reputation for being world-leading, they seem to be in a holding pattern when it comes to creating a regulatory framework for cryptocurrency companies.
A stronger regulatory framework, perhaps modelled around New York’s BitLicense, will raise the caliber and quality of the digital currency businesses operating in both locations. Singapore and Hong Kong would also benefit from more incubators/accelerators, operating in the Silicon Valley mold, to help fund, mentor and gain exposure for local digital currency startups.
Check out itBit's Bitcoin Around the Globe Series!
itBit's Bitcoin Around the Globe series takes a look at bitcoin adoption, use and innovation in different parts of the world. In the past, we have chronicled a variety of locations from the most popular cities for bitcoin in Europe and the United States to bitcoin use and adoption in Canada and the Philippines.