The Monetary Authority of Singapore (MAS) has wisely taken a hands-off approach to the burgeoning field of crypto-currencies such as Bitcoin. Just in case you aren’t familiar, Bitcoin is a cloud-based ledger system that allows users to send digital information to one another securely, without the need of a central authority. Its most famous application is the Bitcoin currency. With Bitcoin the currency, you can send monetary value from person to person, anywhere in the world almost instantly, and be sure that the digital money isn’t fake or hasn’t been spent already- This is all due to the cloud ledger system and peer to peer network.
In Singapore alone there are a half dozen startups working to help build the infrastructure of the network, in areas such as exchanges, wallets, and merchant solutions. Global Foundries, a semiconductor manufacturer with 6,000 employees in Singapore, makes part of the hardware used for the network.
Also Read: Bitcoin: Beyond the fear and media hype
There are also many merchants now accepting Bitcoin as payment for payments made by customers locally. If the business sells internationally, Bitcoin allows them to accept payments instantly and without the risk of chargebacks or fraud from anyone, anywhere in the world.
Benefits to the Singapore economy
With any new technological advance, there will be winners and losers. Bitcoin will change the face of remittance, merchant payments, and many other financial transactions. Just as digital media has altered the state of film production and led to Singapore being a leader (eg Lucas Film and ILM Singapore), so too can Singapore attract and nurture this first wave of digital finance businesses. To put it into direct dollars and cents, in 2013 merchants in Singapore rang up $37 billion in credit card sales, paying about 3.5% in fees. With Bitcoin, these transaction fees can be 0%-1%. That’s a savings of $920 million in fees. This savings is equivalent to paying 10,000 employees a salary of $92,000 a year.
Money Laundering – It’s Just Not a Problem
In 2013 the total amount of Bitcoin exchanged in Singapore was between S$2 to S$2.5 million dollars. Most of these were small transactions by enthusiasts buying $100-$1,000 worth of Bitcoin or exchanging their Bitcoin back into currency. In a single day, Singapore handles S$383 BILLION in traditional foreign exchange. Money laundering is often thrown around as a reason to regulate Bitcoin, but if you wanted to launder, you would do it in a market that you can easily hide in- not one that deals in such small transactions and trade volume. I have yet to hear of an actual prosecution of someone using Bitcoin to launder money. Maybe when Bitcoin reaches daily transaction sizes of $1 Billion, criminals will be able to abuse the network as they do the current system, but until then there’s no need to place it under harsh, unwarranted scrutiny.
Allow the Free Market to Work
A few weeks ago a company based in London, announced that they would be providing insured deposits of Bitcoin- backed by Lloyds of London. This is a perfect example of how the free market is able to handle risk for consumers. If the Bitcoins are stolen, the owner of the account can make a claim. While some in government are talking about consumer protection or the lack of government protection schemes, the free market has proven itself the best regulator of the industry. With time, more of these private solutions will emerge. With Singapore being a financial and insurance hub, it’s only a matter of time till the local outfits see they too can profit by offering products to Bitcoin companies and users.
Time to Grow
The Bitcoin ecosystem needs time to grow. Knee-jerk regulations and fear mongering do nothing to help these creative new companies attract clients and capital. Only by clearly stating that Singapore will not regulate Bitcoin, and that businesses participating in the ecosystem are welcomed by banks, will the country secure its ability to attract the best and brightest in this emerging industry. And where you have high-growth startups the venture capital follows. Let’s allow the innovators and job creators the leg room they need to build the companies of tomorrow. It would be a shame to choke off such a promising technology so early in its development.
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