[ST Premium] Hard for digital currency to catch on as form of payment in Singapore

SINGAPORE - Even as more Singaporeans are investing in popular cryptocurrencies like Bitcoin, it would take a long time for digital currency to gain traction as a mode of payment in Singapore.

Too few mainstream merchants are accepting cryptocurrency for it to become an alternative to fiat currency, said industry watchers.

Two years ago, Kopitiam foodcourt at Funan Mall started accepting cryptocurrency as it wanted to attract "a growing segment of highly tech-savvy customers".

Its former chief executive Alden Tan had said that he would consider rolling out the crypto payment option at other outlets if the response at the Funan outlet was good.

The Straits Times understands that Kopitiam stopped accepting cryptocurrency at its Funan outlet last year.

When contacted, a Kopitiam spokesman told ST that the "trial of accepting cryptocurrency" had ended, and the company is currently evaluating the response.

Assistant Professor Ben Charoenwong from the department of finance at the National University of Singapore Business School felt it would be difficult for cryptocurrency to gain traction here as a mode of payment.

"Merchants simply do not trust most cryptocurrencies. First, they are volatile. Second, they are not legal tender. Therefore, since merchants do not value cryptocurrencies much, they are not willing to accept them for the exchange of goods and services," said Prof Charoenwong, who specialises in financial regulation and investor management.

In Singapore, entities dealing in or facilitating the exchange of cryptocurrencies or digital payment tokens (DPT) are required to be licensed and regulated.

However, the Monetary Authority of Singapore (MAS) does not regulate DPTs and does not set requirements on whether businesses can accept DPTs for payments, said its spokesman.

A check on the MAS website shows some 96 business entities are providing DPT services while MAS assesses their applications for a licence. No licence has been issued to any DPT provider yet.

MAS said it has "observed that a significant number of the DPT service provider applicants are not able to meet the required standards under the Payment Services Act".

"As a result, several applicants have withdrawn their applications after engagement with MAS."

Digital exchange Zipmex, which has facilitated the sale of Lamborghini and Tesla cars bought with bitcoins in Thailand, has applied for a licence with MAS as it hopes to facilitate such transactions in Singapore.

Recent research by crypto education platform Crypto Head has ranked Singapore as the world's third most "crypto-ready" country, with the United States topping the chart, followed by the Mediterranean island of Cyprus.

The ranking takes into account the number of crypto ATMs in the country, their accessibility, crypto legality, whether banks are allowed to use cryptocurrencies and the number of online searches on crypto-related terms.

A cryptocurrency ATM allows one to connect to a cryptocurrency account to buy and sell cryptocurrency.

In 2014, Bitcoin Exchange installed Singapore's first bitcoin ATM at Citylink Mall. Today, there are about 10 ATMs, six of which belong to blockchain technology company Daenerys & Co.

Data from Daenerys & Co showed its ATMs processed 3,709 transactions last year, down from 3,862 transactions in 2019. In the first six months of this year, 1,997 transactions were recorded.

Daenerys' chief technology officer Brian Hankey told ST that 26.62 per cent of its registered customers are aged between 18 and 30, while the rest are aged 31 or older.

Mr Hankey noted that the meteoric rise in the popularity of cryptocurrency has generated demand for more ways for cryptocurrency to be used and exchanged.

But high transaction fees and non-instantaneous transaction completion times could have prevented greater adoption.

However, these issues should be alleviated as technology improves, said Mr Hankey.