A country known for fintech innovation seems to be ready to sweeten the pot when it comes to consumer use of cryptocurrencies.
News breaking today shows the Singapore government is considering an exemption of the nation’s value added tax, the Goods and Services Tax or GST, for some cryptocurrency transactions.
According to these rules, which might be going into effect on the first day of 2020, only certain crypto coins qualify.
The types of cryptocurrencies falling under the exemption would be those that are truly decentralized and work according to the general principles of cryptocurrency as it was originally set up when Satoshi Nakamoto mined the Genesis block.
For example, the Inland Revenue Authority of Singapore (IRAS) names Bitcoin, Ethereum, Litecoin, Monero and others as cryptocurrencies that would be exempt under this provision.
On the other hand, stablecoins would not generally qualify.
Setting forth the criteria for “digital payment tokens” treated under the VAT exemption, IRAS states that qualifying coins should have these characteristics:
- expressed as a unit
- not denominated in any currency, and not pegged by an issuer to any currency
- intended to be a medium of exchange accepted by the public
The third one here is notable because it aptly describes the difference between decentralized cryptocurrencies and the types of stablecoin ‘products’ that are being created by big companies like J.P. Morgan and Facebook.
Emerging news continues to suggest that Facebook Libra will start to dominate some areas of e-commerce, with an ability to function as an in-app medium.
As a stablecoin, Libra is based not on one fiat currency, but on a basket of traditional currencies – that still makes it a stablecoin and not subject to treatment like what’s being proposed by the Singapore IRAS. With Libra, node holders pay $10 million a piece to become part of a maintenance community.
There’s a big debate in the crypto community over whether stablecoins and tokens pegged to currencies like the US dollar really count as cryptocurrencies. One of the biggest differences is the control over the market – it’s fundamentally different to hold a stablecoin than it is to hold a decentralized coin, because of what stakeholders can do to it.
Singapore’s new proposed regulatory regime highlights this difference as it indicates increasing adoption of cryptocurrency as a concept.