Cryptocurrencies Could Unseat Cash as King in Singapore
Singapore is positioning itself to become the global capital for all things blockchain and cryptocurrency-related.
With the Singapore government giving its most tacit endorsement to cryptocurrency trading and Initial Coin Offerings (ICO) by releasing a retail investor’s guide to the digital assets, how far away is Singapore from becoming a cryptocurrency haven?
According to Alwyn Lim, assistant professor of Sociology at the Singapore Management University, writing to The Business Times, “Most of our cash and payment systems are very highly integrated. Many Singaporeans already engage in cashless transactions. For example, receiving their salaries, investing, even payment for everyday items, and I expect a very seamless transition into an economy that is mainly cashless.”
The observation is significant because cryptocurrencies are digital and not physical in nature and in order for greater cryptocurrency adoption, physical money will need to be replaced with digital money as a logical first step. According to a PayPal study in Singapore last year, over 40 percent of people on the island nation make most of their payments in cash, while a staggering ninety percent said that cash would be their first choice.
“There seems to be an attachment towards physical cash in Singapore, particularly among the older generation. But once the psychological hurdle is overcome and once the back-end infrastructure is in place, the move towards a cashless society could, in fact, happen very quickly.” – Associate Professor Davin Chor, National University of Singapore economics department
Chor’s observation bodes well for the island nation and global financial center which is jostling to become the pre-eminent destination for all things blockchain and cryptocurrency-related. But a dollar is a dollar, right? Not so it seems, as the electronic payments landscape in Singapore is notoriously fragmented.
With their high transaction fees, many stores still resist credit card or Nets terminal fees, with Nets being a debit-style payment method monopolized by local banks DBS, UOB and OCBC. The issue has been noted by Singapore’s Prime Minister Lee Hsien Loong who lamented last year at a National Day Rally address, “In Singapore, we too have e-payments, but we have too many different schemes and systems that do not talk to one another.”
KPMG Singapore’s head of financial services advisory Chia Tek Yew notes that most platforms are “closed”, “They allow transfers or payments only when senders and recipients belong to the same system. Which means that they either share the same wallets or have bank accounts with the same bank.”
If the problems are there for just the Singapore dollar, what more for cryptocurrencies which offer a cornucopia of choices? While Singaporeans may be some ways away from using Bitcoin to pay for their burger, they may soon be paying for their Lamborghini with Litecoin.
As the world’s third-largest ICO jurisdiction in 2017, Singapore has become a playground for what leading cryptocurrency payment gateway Aditus co-founder Julian Peh dubs “crypto-affluents” who have been drawn to the global financial center for its laws which foster innovation in cryptocurrencies and promote ICOs, while protecting retail investors.
“For high-value transactions, such as art, property, yachts and supercars, the new crypto-affluents have choices to open to them that were previously unavailable.” – Julian Peh, CEO and co-founder of Aditus
Aditus acts as a bridge, allowing newly-minted crypto-millionaires to spend some of their digital assets by providing a payment gateway for existing luxury merchants to receive fiat currency, such as the Singapore dollar and allowing crypto-affluents to pay in a major cryptocurrency. The company has already teamed up with Lamborghini Singapore to allow crypto-affluents to live out their supercar fantasies. It was also one of the first companies in the world to facilitate the sale of a superyacht, paid for entirely in cryptocurrencies.
The beauty of cryptocurrencies is that transaction costs are far lower than fiat currency transactions and with no intermediaries in some cases, such as peer-to-peer transfers, the savings could be enormous.
As cryptocurrencies grow in popularity globally as well as in Singapore, the government’s push to get Singaporeans to go cashless will help to facilitate that transition. Even traditional banks are getting onboard the blockchain, the technology which underpins cryptocurrencies. Swiss bank UBS has been testing blockchain-based Utility Settlement Coins since 2015.
These are fully asset-backed tokens that are billed as instruments to make clearing and settling trades quicker and simpler. According to Sundeep Gantori, an analyst at UBS Wealth Management, “In an industry that relies on acting as an intermediary in transactions, the distributed nature of blockchain could be seen as a potentially major threat to financials. But it also promises significant costs savings for incumbents. We estimate that blockchain could add as much as US$80 billion to US$100 billion of economic value in the financial services industry by 2027.”
Whether that value is passed on to bank customers however remains to be seen. With global remittances a US$38 billion-a-year business, there is little incentive for legacy financial intermediaries to alter their business models or to pass on savings from the blockchain on to customers. That’s where cryptocurrencies can play a major role, with Bitcoin and Ethereum publicizing the distributed technology of the blockchain that underwrites them.
Just as people once scribbled on bank notes, users such as activists in China now publish material in indelible cryptocurrency transaction records to dodge censors. As sociologist professor Lim notes, “The move towards a cashless society would make money purely representational and completely divorced from even its paper form, which in itself was already symbolic of gold reserves in the previous period.”
Cryptocurrencies have been criticized in some quarters as not being underpinned by any physical assets, with many of the critics not realizing that the fiat currency, the paper dollars and metal coins we use are also not underpinned by anything other than a government’s promise not to print so many of the darned things that they become worthless. With Singapore’s push for a cashless society, companies such as Aditus stand at the nexus of that brave new world, to usher in a new age of truly “cashless” transactions.
Original article posted on www.cryptoinvestor.asia.