Cryptocurrency is a form of digital asset designed to function as a medium of exchange or investment, without needing a central bank or financial intermediary. Unlike the cash in your wallet or the money in your bank account, cryptocurrencies run on blockchain technology—a decentralised, tamper-resistant system that records transactions across a distributed network of computers.

At its core, a blockchain is like a shared digital ledger that tracks who owns what. Every transaction is verified and permanently stored, enhancing the immutability of historical data. This allows users to transfer assets directly peer-to-peer, independent of established banks, which often come with processing fees and delays.

Some types of cryptocurrencies include: 

• Launched in 2009, Bitcoin holds the distinction of being the pioneering and most recognised cryptocurrency. It was developed as a peer-to-peer alternative to government-issued money and is commonly used as a store of value rather than an everyday payment method.

• Ethereum, created in 2015, introduced the concept of smart contracts—self-executing agreements coded into the blockchain. 

• Altcoins encompass all other cryptocurrencies that are not Bitcoin. These include coins like Ethereum, each offering different features such as faster transactions, lower fees, or specialised use cases within decentralised finance (DeFi), gaming, or tokenised assets.

>> MORE: What is blockchain and how can you invest in it?

While Singapore ranks 75th globally in terms of crypto adoption, it has continued to gain momentum, with more locals exploring digital assets as part of their broader financial strategy. According to 2024 data, 26% of Singapore residents now own some form of cryptocurrency—up from 24.4% in the previous year. 

Among these investors, a growing number use crypto not just for trading, but also for practical purposes like online purchases and bill payments. In fact, over half have used digital assets for transactions, and two-thirds plan to do so more often in the future.

For many, the appeal lies in the potential for high returns and the ability to diversify their portfolio beyond traditional assets. The inherent volatility of the crypto market offers opportunities to profit from both rising and falling prices—though this comes with increased risk. And younger, tech-savvy Singaporeans, in particular, are drawn to the flexibility of crypto and the passive income possibilities through staking.

Moreover, despite the speculative nature of the market, confidence is growing, partly due to the Monetary Authority of Singapore (MAS) adopting a cautiously progressive regulatory stance. As of November 2024, MAS had issued 13 new digital payment token (DPT) licences, bringing the total to 29—an encouraging sign for crypto adoption.

At the heart of every cryptocurrency is a technology called blockchain — a decentralised, tamper-resistant ledger that records transactions across a network of computers. As mentioned, unlike traditional currencies, which are issued by governments or central banks, cryptocurrencies function independently of any single authority. Every transaction is timestamped, verified by consensus, and permanently stored in blocks that link together to form an unchangeable chain.

This system ensures that all participants agree on the ownership of digital assets at any given time, which means that when you send crypto to someone else’s digital wallet, the transaction is not final until it’s validated and recorded on the blockchain — a process often carried out through mining or other consensus mechanisms.

Tokens — a broad term for crypto assets — serve multiple purposes. Some act as a medium of exchange, allowing users to pay for goods or services. Others function as a store of value, where people hold assets expecting them to retain or grow in value over time. Certain tokens also operate as a unit of account, helping to measure and compare the value of items traded.

Beyond these, newer categories like DeFi tokens, governance tokens, and security tokens add complexity and flexibility to blockchain-based systems. They’re used for everything from peer-to-peer lending to voting on protocol changes or tokenising shares in real-world businesses.

There are three primary ways to create cryptocurrency: building a new blockchain from scratch, modifying an existing blockchain, or issuing a token on an existing platform like Ethereum. 

One common creation method is mining. This involves using computing power to solve complicated equations, which helps validate transactions and adds new blocks to the chain. In return, miners earn new coins. Bitcoin is the most well-known example of a mined cryptocurrency.

Cryptocurrencies also use Proof of Work (like Bitcoin's mining) or Proof of Stake to validate transactions and create new coins on the blockchain. Proof of Work secures the network by requiring miners to compete in solving computational challenges, earning crypto as a reward.

New projects may also distribute coins through airdrops, often giving tokens to early adopters or users who complete simple tasks—typically to raise awareness and encourage usage.

For most Singaporeans, though, the easiest way to get started is to buy crypto via MAS-approved exchanges such as Coinhako or Independent Reserve and then store it in a secure wallet for safekeeping or future trading.

The explosion of cryptocurrencies in recent years stems from rapid innovation, low barriers to entry, and growing interest in decentralised finance. Platforms like Ethereum have made it easy for developers to launch new tokens, each designed with specific functions—whether it's powering a financial service, granting access to a digital platform, or representing ownership of virtual or real-world assets.

Some coins exist to improve on the limitations of earlier projects, while others are created to serve niche communities or test new blockchain features. But with opportunity comes risk—many projects are experimental or short-lived, and some are outright scams.

To assess a coin’s popularity and legitimacy, investors often refer to its market capitalisation—the total value of all its coins in circulation. Coins with high market caps tend to be more widely adopted and less susceptible to price manipulation.

If you're new to the space, it's wise to stick with coins listed on licensed exchanges in Singapore, such as Coinhako and Independent Reserve. Still, even established tokens are not immune to volatility. After all, popularity alone doesn’t guarantee long-term value—always do your research and be cautious of hype-driven decisions.

The classification of a cryptocurrency as a security is determined by its design and intended application — and the answer isn’t always straightforward. Unlike traditional assets such as stocks or bonds, which clearly fall under the Government Act, digital tokens sit in a legal grey area. Their classification often hinges on their specific characteristics.

In Singapore, the MAS governs cryptocurrencies under the Payment Services Act (PSA). Tokens used for payments — called digital payment tokens (DPTs) — are regulated under this framework. But not all cryptocurrencies fit neatly into this category. Some may be classified as e-money, while others might resemble capital markets products, in which case they fall under the Securities and Futures Act (SFA).

Because of these blurred lines, legal guidance is often essential for businesses or investors dealing with crypto assets in Singapore.

Cryptocurrency sparks strong opinions — some view it as a game-changing innovation, while others see it as a speculative bubble. To decide whether it fits into your investment strategy, it’s worth taking a clear-eyed look at both the benefits and the risks.

Pros of cryptocurrency

• Long-term price potential: Despite its volatility, Bitcoin has seen massive price appreciation since its inception. Investors drawn to the long-term growth story see crypto as a high-risk, high-reward asset.

• Decentralisation: Unlike fiat currencies controlled by governments, most cryptocurrencies operate without central oversight. This makes them attractive to users seeking more autonomy over their assets.

• Inflation resistance: Coins like Bitcoin have a capped supply, which appeals to those worried about inflation and the long-term value of traditional currencies.

• Accessibility: Anyone can buy with a smartphone and internet connection, can send or receive crypto. This opens the door to financial tools in regions where traditional banking is limited.

• Transparency: Blockchain technology ensures that every transaction is recorded on a public ledger, making it easier to verify and audit activity.

• Security: Cryptocurrencies use strong encryption protocols, and once a transaction is confirmed, it cannot be altered — reducing fraud risk.

• Passive income through staking: Some cryptocurrencies offer staking, allowing holders to earn rewards by helping validate transactions.

• Speed: Transactions, especially across borders, can be settled within minutes instead of days, which is a huge draw for users frustrated by banking delays.

Cons of cryptocurrency

• High volatility: Crypto prices can rise or fall dramatically in short timeframes. This makes it risky, especially for investors hoping to make quick gains.

• Speculative risk: Many crypto assets are driven by hype or market sentiment, not fundamentals. Without strong project backing, some tokens collapse or vanish.

• Regulatory uncertainty: Crypto regulation is still evolving globally. In Singapore, MAS provides oversight under the Payment Services Act, but rules vary and can shift rapidly.

• Environmental concerns: The mining process, especially for Bitcoin, consumes significant electricity and raises sustainability issues.

• Security threats: While blockchains themselves are secure, crypto wallets and exchanges remain vulnerable to hacks and phishing scams.

• Not fully anonymous: Transactions are pseudonymous, not private. With enough data, identities can potentially be traced.

• Entry barriers for participation: Mining or running a validator node often requires expensive hardware and technical knowledge, centralising control among those with resources.

Cryptocurrency offers a mix of opportunity and risk — and while the technology continues to mature, it’s important to approach it with a balanced, well-informed mindset.

Cryptocurrency is legal in Singapore, and the country continues to position itself as a global hub for blockchain innovation. The MAS oversees regulation of the sector, balancing its support for technological advancement with measures to mitigate risks such as money laundering and market abuse.

• Cryptocurrencies are regulated under several frameworks. The Payment Services Act (2019) provides licensing guidance for crypto exchanges and payment services while also addressing issues like money laundering and terrorist financing. The Securities and Futures Act (2018) determines whether certain digital tokens—such as those issued via initial coin offerings (ICOs)—are considered securities and outlines the corresponding licensing requirements. Additionally, the Code of Practice (2020), developed by ACCESS in collaboration with MAS, supports crypto firms in aligning with ethical standards and licensing requirements.

• From a tax perspective, Singapore offers a favourable regime. There is no capital gains tax, which means that individuals who buy and hold cryptocurrencies as long-term investments do not pay tax on profits when they sell.

• However, crypto-related income—such as trading as part of a business, mining, or being paid in crypto—is subject to income tax. In such cases, individuals and businesses must report earnings in their annual tax returns.

• The Inland Revenue Authority of Singapore (IRAS) classifies digital tokens into two main types. Digital Payment Tokens (like Bitcoin and Ethereum) are not taxed. Stablecoins, however, may be subject to goods and services tax (GST) if used in transactions.

• Mining operations are treated as taxable businesses. Miners are required to pay 17% corporate tax on profits, in line with Singapore’s Income Tax Act.

>> MORE: How to buy cryptocurrency in Singapore: What investors should know

Cryptocurrency is one of the most talked-about asset classes today — but that doesn’t mean it’s right for everyone. 

If you're wondering if you should invest in crypto, the short answer is: it depends on your financial situation, risk tolerance, and long-term goals. 

While digital assets like Bitcoin have delivered staggering returns for some investors, they remain highly volatile and speculative. 

Here's how to think about including crypto in your portfolio — if at all.

Start by keeping your crypto exposure small. As a general guideline, your allocation should not exceed 5% of your total net worth, especially if you're willing to accept some risk. If you're more conservative, keep that limit closer to 2% or 3%. This small allocation ensures that even if your crypto holdings drop significantly in value, your broader financial plan won’t be derailed.

And just like with any investment, diversification is key. The rest of your portfolio should be balanced across a mix of asset classes so you're not overly exposed to the performance of any single investment. 

Periodically rebalancing is also essential. If your crypto assets suddenly surge and make up a larger percentage of your portfolio than intended, it's wise to trim your position and reallocate the profits into other investments. This helps avoid concentration risk.

Also, never invest money you can’t afford to lose. Crypto assets like Bitcoin and altcoins are not backed by physical assets or revenue-generating companies. Instead, their value often relies on the size and engagement of their networks. That makes them susceptible to dramatic price swings, especially with thousands of competing coins in circulation. Think of it like investing in a promising startup — high potential, but no guarantees.

Also, do not use borrowed money to invest in crypto. Using leverage can magnify gains, but it also increases your exposure to losses. With Bitcoin’s daily volatility averaging around 3%, according to reports, a 10x leveraged position could be wiped out in a few days of market downturn.

Lastly, ensure your emergency savings are sorted before you put money into crypto. Because of its volatility, crypto is not a place to park funds you'll need soon — like your rent, bills, or home deposit.

>> MORE: How does cryptocurrency work? A study in Bitcoin

Here’s a quick checklist to help you assess any cryptocurrency project before investing:

• Are the cryptocurrency exchanges licensed to operate in Singapore and regulated by the Monetary Authority of Singapore?

• While not a guarantee of success, backing from well-known venture capital firms or institutional investors can be a positive signal.

• Understand the difference. Most crypto projects offer tokens that give access to a network or utility — not ownership or profit-sharing rights like stocks do.

• Projects that are live and operational carry less risk than those still in early development or fundraising stages.

So, before putting in your money, take the time to review the project’s whitepaper. This document outlines the project's purpose, technology, tokenomics, and roadmap. And be on the lookout for red flags, such as vague goals, exaggerated highs immediately followed by lows, or a lack of technical detail. Always remember — if it sounds too good to be true, it probably is. 

Investing in crypto can be exciting, but it's essential to stay vigilant, do your homework, and protect yourself from scams.

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