Why Singapore doesn't need Bitcoin

Why Singapore doesn't need Bitcoin

Summary: The island will get its first Bitcoin ATM in March, but does it really need another currency which main appeal is the anonymity it offers, especially since Singapore is reportedly susceptible to money laundering?

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It's cool, it's hip, and it's virtual. Bitcoin has garnered much attention the world over, including here in Singapore where news broke this week that the island will be getting its first Bitcoin ATM. The question, however, is whether the country needs another currency, especially one that carries with it inherent risks.  

Singapore-based trading platform, Bitcoin Exchange, purchased a Lamassu system and is scouting for a location to place the ATM, which will begin operation in March. The company plans to acquire more units if demand grows, according to Bitcoin Exchange's director Zann Kwan. 

She told local newspaper MyPaper that Bitcoin buyers in Singapore currently need to wait at least a day after transfering money, including service fees, to an overseas exchange before they receive their Bitcoins. "This is not cheap and defeats the concept of bitcoin... A Bitcoin vending machine makes it very easy and safe to buy Bitcoin, and avoids such additional costs and other risks," Kwan said, pointing to the possibility sellers might default on the transaction. 

She told CoinDesk.com the company had yet to decide from which exchange it would base its rates. "There are a few bars that are accepting Bitcoins now and people are talking about it, but you need a few people to start the ball rolling, then the momentum will pick up," she added.  

According to Lamassu, an ATM unit is priced from US$5,000 and can issue Bitcoins in 15 seconds. Another Bitcoin ATM manufacturer, Robocoin Technologies, last month said it was negotiating plans to bring its kiosks to Hong Kong

While countries such as China and Thailand--and possibly India and Indonesia--have outlawed the use of the currency, Singapore has chosen a different route by choosing not to regulate it, but warning businesses and individuals they will trade with Bitcoin at their own risk. The country's Inland Revenue Authority last month outlined tax requirements for transactions involving the digital currency

That my government has somewhat embraced Bitcoin isn't surprising, since it traditionally has been deemed to be business-friendly. In its annual report released last October, the World Bank again ranked Singapore the world's easiest place in which to do business, offering the most business-friendly regulatory environment for local entrepreneurs. 

Inherent risks may damage Singapore financial reputation

This friendliness, however, has brought with it global critics who say the nation has become a tax haven and hub for money laundering activities. 

Add Bitcoin to the equation, and such risks may exacerbate. The currency's biggest appeal is the anonymity it affords its users, and it is this trait that has led to the associated risks, including money laundering and funding of illegal activities. 

In a risk assessment study released last month, the Singapore government said the country was potentially susceptible to money laundering and terrorist financing, adding that some sectors needed stronger oversight to mitigate such risks. The report assessed 14 financial and 8 non-financial sectors in the country including banks, money changers, casinos, and money lenders. It noted that internationally-oriented and cash-intensive sectors, in particular, were at risk. "Full banks face higher inherent risks, owing to their large customer volumes and the international nature and the international nature of their transactions," it said. 

Bitcoin also is international by nature, as is its transactions. Furthermore, its appeal to buyers and sellers who seek anonymity has led to illegal activities and the sale of contraband goods, some of which eventually shut down sites such as Silk Road and Sheep Marketplace

It is such risks that have led China and India to warn against the use of the digital currency. Nonetheless, this hasn't stopped retailers and consumers from lapping up the currency of the month.  

A "cool" novelty for merchants, but not compelling payment option

Some merchants in Singapore have started accepting Bitcoins, including Bartini Kitchen, Squash Passion, Artistry, and Hospoda Microbrewery. I asked fellow ZDNet blogger and restaurant owner in Singapore, Howard Lo, if he planned to follow suit. Here's his reply: 

"Bitcoin is cool and I think there's a certain PR value for accepting Bitcoins. The geeky folks, of which there are many in Singapore, would probably come check you out just to see what it's like to do a transaction using Bitcoins.

But is it worth training the staff and implementing the infrastructure to support Bitcoins? To be honest, I don't know what is needed to actually accept Bitcoins. I imagine it's just an electronic transfer into the Bitcoin account. But I'd want to figure out if it is worth the tradeoff in time to support just 1 or 2 people per week who might actually pay by Bitcoin.

The fluctuation in the value of Bitcoins is worrying. There's the possibility of making a lot just from that fluctuation, but what if the value drops dramatically? Alternatively, do I convert the Bitcoin into Singapore dollars at the end of each night? That could be a hassle.

And how do I display my prices in Bitcoin? Let's say a S$15 lunch set…do I change the Bitcoin price every day since the currency fluctuates so much? 

I'm not concerned about someone hacking my Bitcoin account, but I will need to look into what kind of Bitcoin fraud happens. Whether it's a customer perpetrating a fraud on me or someone pretending to be my restaurant and somehow getting money from someone else." 

Indeed, money laundering risks aside, there remains many questions about the viability of Bitcoin. Why would it appeal to Singapore consumers who already are used to cash, electronic payment NETS, credit and debit cards as payment options? 

Sure, Bitcoin is universal and currency-agnostic, but purchasing in a foreign currency isn't an issue for Singaporeans who are very familiar with e-commerce. The one attraction in this case would be the ability to transact in a currency that's stable so online shoppers will know how much they're spending and won't lose out in the local-foreign exchange. But with its highly fluctuating and volatile state, Bitcoin currently is unable to offer this. 

And for the merchants, as Howard pointed out, there currently are few reasons for him to want to offer it as a payment option.  

In the Sheep Marketplace incident, Reddit user "kyerussell" rebuked anyone for thinking they could get their money back. "It seems that this subreddit is full of people that don't understand the fundamentals of bitcoin and somehow think that this'll result in people getting their money back. It won't. That's the point of bitcoin... You aren't going to get anything back. None of you are going to get anything back, and it's by design. This is EXACTLY how Bitcoin is supposed to work. Bitcoin would be fundamentally broken if you somehow got your money back."

And unlike theft of real cash, it remains to be tested if there will be legal recourse for the loss of the digital currency. As a ZDNet reader pointed out: "Really, I would say it is exactly like black market cash."

With all the associated potential risks, and many unanswered questions, there is little reason to choose to transact in Bitcoin over traditional payment options. If its value stabilizes, and governments start recognizing it as a legal currency with a proper framework for consumers to seek recourse, perhaps then. But, just not right now.

Topics: Banking, E-Commerce, Singapore

About

Eileen Yu began covering the IT industry when Asynchronous Transfer Mode was still hip and e-commerce was the new buzzword. Currently a freelance blogger and content specialist based in Singapore, she has over 16 years of industry experience with various publications including ZDNet, IDG, and Singapore Press Holdings.

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9 comments
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  • I'm quite sure...

    ...Singaporean banks already trade it. Singapore is a reputed hotbed of capitalism, so if there's money to be made, and it doesn't threaten the ruling party, or its concept of public morals, Singaporean firms will try to make it.
    John L. Ries
    • Where does it say Banks accept bitcoin?

      The bitcoin company has installed their own atm not connected with any bank. you sure can put cash in there are buy bitcoins. They keep the cash.
      maharawj
  • Why Singapore Need Bitcoin

    Our response:
    http://www.bitcoinexchange-sg.com/2014/02/our-response-to-zdnet_6.html
    bitcoinatmsg
  • Why nobody is addressing the real issue about bitcoin

    Is it really a currency. As far as I know it seems to converting your electricity to bitcoins. Add the investment of your computer.
    You just invest in a computer and keep it running and you get bitcoins.
    Where is the value?
    I think you should be clear that a BANK DID NOT Start accepting Bitcoins cause when you say ATM people think of a bank.
    Bitcoin is really some play currency, and this unwarranted attention it is getting might actually make it a real one. Oh that would be the day
    Google or any server company would become millionaires. They have to just run bitcoin generater on their server "FARM" and generate billions of bitcoins from their unused CPU cycles on their servers. They cud program it to have the last priority
    When you consider that you realize who stupid this entire concept is
    maharawj
    • Ignorance+ Nonsense

      I had these words with my account BA graduate nephew working with a large bank:
      Me: Have you heard of bidcoin?
      He: It's a ponzi scheme.
      Me: why?
      He: It's an internet currency, they are selling you air!
      Me: Do you know how bitcoin really work.
      He: Nope.
      People who does not know a thing about bitcoin (except hearsay from 'grandmother') talks as if they really know. This is mostly hearsy opinions, and as they say "everyone has one...like an... "
      NASDAQ/BoA may crash to zero, but bitcoin can never! - because there are no big corrupt institutional players which may be forced to dump or go BUST. Bitcoin will go to ZERO the day when there is NO MORE INTERNET.
      meAbdullah
      • It's not really a Ponzi scheme

        In a Ponzi scheme, the promoter pays early investors with the proceeds of later investments; keeping things going as long as he can until the money dries up, at which point he skips the country. There is no evidence that I'm aware of that suggests that Bitcoin promoters are doing anything like that.

        Bitcoin is an alternative medium of exchange designed to hold its value by mathematically limiting the number of units that can ever be in circulation. As far as I can determine, its promoters are driven primarily by ideology rather than greed; and in the main, they are probably acting in good faith. But it still has zero intrinsic value (nobody buys Bitcoin for its own sake); is backed by nobody, and it thus far, it's been more of a speculative instrument than a medium of exchange. I still see it as a large scale macroeconomic experiment on how stateless, hard money (what Randians have been advocating for over half a century) will play out in the real world. To the extent it succeeds or fails, we learn something; and I think economists will be studying and commenting on it and its imitators for years to come.
        John L. Ries
  • Thanks

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  • The Singaporean position is actually the sensible one

    Trade in Bitcoin if that's what you want to do, but understand that's you're doing it at your own risk, and if you lose your shirt, you'll get no relief outside of bankruptcy court.

    I have little love for political machines like the PAP, but I'm more than happy to praise them when they do the right thing.
    John L. Ries