Fuelled by the COVID-19 pandemic, 67% of personal investors in Singapore say they have expanded their cryptocurrency portfolio, which is more likely to include Ethereum. Some 33% in the country, though, have yet to invest in cryptocurrency, with more than half citing a lack of knowledge as the key reason.
Amongst those who held cryptocurrencies, 78% said they owned Ethereum while 69% had Bitcoin and 40% carried Cardano, according to a survey released Monday that polled 4,348 respondents in Singapore, including 2,862 who said their investment portfolio currently included cryptocurrencies. The study was conducted by cryptocurrency platform Gemini, financial platform Seedly, and cryptocurrency price-monitoring site CoinMarketCap.
Respondents were aged between 18 and 65, with an average household income of SG$$51,968 ($38,467). Half of those who owned cryptocurrencies were 25 to 34 years old, while 19.8% were 35 and above.
Singapore’s banking industry, which is expected to have up to five new digital market entrants, says a Forrester analyst, who underscores a need to build consumer trust and for small businesses to be better served.
Some 67% of respondents who owned personal investment products said they had cryptocurrency in their portfolio. Amongst the remaining 33% who did not, 69% pointed to a lack of knowledge and understanding of digital assets as a barrier. Another 52% cited the market’s volatility as an obstacle, while 29% said they were uncertain how to invest in cryptocurrencies.
However, 34% said they planned to purchase their first cryptocurrency in the next year. Some 76.2% would do so if the price was attractive, while 58.6% would buy cryptocurrency if it provided better investor protection.
The majority of those who had invested in cryptocurrency, at 81%, said they did so as a long-term investment. Another 58% said they traded cryptocurrencies for profits and 43% tapped such deposits for interest gains.
Across all respondents, 59% expressed interest in cryptocurrency investment as a form of decentralised finance, while 41% were keen on its potential for hedging against inflation.
Some 64% of those who owned cryptocurrencies had at least 5% in their investment portfolio. This portfolio mix increased to more than half amongst 20% of cryptocurrency holders aged between 18 and 24. Another half of respondents between 35 and 44 years owned cryptocurrencies worth at least SG$10,000 ($7,402).
In choosing a cryptocurrency exchange, 55% prioritised security while 23% said a regulated exchange or platform was their deciding factor. Another 20% assessed such decisions based on the platform’s service fees.
Gemini’s Asia-Pacific managing director Jeremy Ng said: “Similar to the growing momentum in the cryptocurrency industry across the world, we are seeing a growing level of investor interest in Singapore, which is encouraging.
This study has underscored that barriers to entry for potential investors still remain. Engagement with, and education of, both the crypto-curious and current investors will be key to tackling the knowledge gap and ensuring that cryptocurrency is accessible to everyone in Singapore.”
Seedly’s co-founder and CEO Kenneth Lou also pointed to the growing demand for financial literacy in such investments, as cryptocurrency increasingly was “a recognised investment channel”.
Australian cryptocurrency exchange, Independent Reserve, early this month said it received an “in-principle approval” letter from Singapore’s industry regulator Monetary Authority of Singapore (MAS) to operate as a licensed provider of digital payment token services, which included cryptocurrencies.
Independent Reserve, which established its Singapore operations last year, said it was required to implement controls to ensure “proper due diligence, suitable solicitation, and adequate risk disclosure” to secure the license as a virtual asset service provider. The exchange has more than 200,000 customers in Singapore, Australia, and New Zealand, and processes Ethereum and Bitcoin amongst other cryptocurrencies on its trading platform.
MAS in 2019 said it was assessing plans to allow payment token derivatives, such as Bitcoin and Ethereum, to be traded on local exchanges and for such activities to be regulated. The move was aimed to address international investor interest in cryptocurrencies, it said.
The Singapore regulator then had cautioned that payment tokens and their derivatives were not suitable for most retail investors as these tokens typically offered little or no intrinsic value, were difficult to value and were subjected to high price volatility. It advised retail investors to “exercise extreme caution” when trading in payment tokens and their derivatives.
In a written response to parliament in April 2021, Singapore’s Senior Minister and Minister-in-charge of MAS Tharman Shanmugaratnam reiterated that cryptocurrencies were highly volatile because their value typically was not tied to economic fundamentals and, hence, were “highly risky as investment products”.
Tharman noted that the risks differed when cryptocurrencies were used for payment purposes, as opposed to securities tokens, and the government’s regulatory approach would be applied accordingly.
In another written response to parliament in July 2021, Tharman said MAS was in the “final stages of review” for several license applications to operate as digital payment token service providers. Assessment criteria included the applicant’s understanding of risks relating to money laundering and financing of terrorism, he said.
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MAS in 2018 warned eight cryptocurrency exchanges against engaging in unauthorised trading, specifically, those involving securities or futures contracts. It also had repeatedly cautioned the public about the risks of cryptocurrencies and to understand the environment before investing in digital tokens, stressing that these were not recognised as legal tender and functioned in an unregulated environment.