Singapore Budget Impact on Crypto: Web3 Community Sees New Dominance in Asia

Web3 and digital asset firms in Singapore were optimistic about the potential impact of the 2024 budget on the growth of crypto in the region and is seen as an opportunity to address key areas of concern for the web3 community, including:

1. Upskilling: The budget is expected to focus on developing a skilled talent pool in blockchain technology and artificial intelligence, which is seen as a significant barrier to growth.

2. Reducing Barriers: The government is looking to make blockchain adoption more accessible, which could help Singapore maintain its dominance in Asia's crypto market.

3. Cybersecurity: With the increase in digital assets, there is a need for robust cybersecurity measures to protect against cyber threats.

The Finance Minister, Lawrence Wong, is a key figure in this process, as the web3 community seeks targeted interventions to ensure Singapore's continued leadership in the crypto sector. The budget's timing is also significant, as it comes before the general elections in the following year, emphasizing the importance of policy continuity for the web3 community.

Singapore's Position in Asia's Crypto Market

The budget was set to be announced before a leadership change, with Prime Minister Lee Hsien Loong preparing to step down. Despite this political shift, the Monetary Authority of Singapore (MAS) has clearly stated its stance on crypto and web3 adoption. In 2022, the MAS launched Project Guardian to assess the feasibility of asset tokenization, signaling Singapore's commitment to its web3 ambitions.

The MAS has granted Major Payments Institution (MPI) licenses to at least 18 crypto businesses and payment companies, including Ripple and Blockchain.com. In October 2023, the MAS partnered with international financial authorities to promote responsible innovation in digital assets.

Singapore's Regulatory Approach

Singapore has been tightening its regulatory framework while also granting licenses to web3 firms, giving it a unique position in Asia. As regional neighbors like South Korea and Hong Kong develop stricter regulations, Singapore's budgetary decisions will significantly affect the region's crypto ecosystem.

What happened in the Singapore Budget?

Themed as “Building Our Shared Future Together”, the budget has something for everyone as it aims to ease pressure on households and businesses while maintaining a responsible fiscal outlook.

“I know that many households are feeling the pressure of higher living costs,” Wong, Singapore’s deputy prime minister, says in his budget speech.

“There are many pressures for us to spend more, be it on healthcare, social needs, or the energy transition, and these are all big-ticket items.

“The medium-term fiscal position is tight… [but] we are cautiously optimistic that 2024 will be a better year.”

Singapore’s government expects to end the 2023 financial year with a deficit of S$3.6 billion, or 0.5 per cent of the GDP. The government is forecasting a "small surplus" of S$0.8 billion - or 0.1 per cent of GDP for this financial year.

This, Wong notes, is "essentially a balanced fiscal position”.

“On the whole, we are cautiously optimistic that 2024 will be a better year,” he adds. “Besides lower inflation, we expect higher GDP growth at 1.0 per cent to 3.0 per cent.”

Key takeaways from Singapore’s budget 2024

1. S$1.3 billion support for business, which includes all companies with at least one employee in 2023 receiving a S$2000 cash grant and being eligible for a 50 percent corporate income tax rebate, capped at S$40,000

2. Introduction of a fully refundable investment credit for qualifying expenditure on eligible projects

3. A S$2 billion top-up to the Financial Sector Development Fund

4. More than S$1 billion investment in AI over the next five years

5. S$5 billion for new Future Energy Fund to help Singapore's transition to cleaner fuels

6. The government will proceed with elements of its BEPS 2.0 agenda targeting the taxation of MNEs

7. Nationwide Broadband Network upgrade to enable mass market access to broadband speeds 10 times faster than today

8. S$3 billion set aside for R&D in the Research, Innovation and Enterprise 2025 (RIE2025) plan

9. S$1.9 billion in cost-of-living relief measures, including support for households and seniors.

How will the Singapore Budget 2024 impact the web3 community?

The recently announced Budget 2024 in Singapore has several provisions that may impact the Web3 community, including tax reforms targeting multinational enterprises, supporting businesses in Singapore, investments in innovation and infrastructure, and alleviating cost-of-living pressures. Here's how these changes could affect the Web3 community:

1. Tax Reforms Targeting Multi-National Enterprises:

The government will proceed with two components from the second pillar of the Base Erosion and Profit Shifting (BEPS) 2.0 framework.

The introduction of a minimum effective tax rate of 15% on overseas profits for multi-national enterprises (MNEs) headquartered in Singapore may encourage these organizations to reassess their tax strategies and potentially adopt more transparent and sustainable practices. This could lead to increased investor confidence and an improved reputation for Singapore as a hub for blockchain and cryptocurrency businesses. However, the impact on Web3 startups remains unclear, as they might not have the same level of resources to comply with the new regulations.

2. Supporting Businesses in Singapore:

The 50% corporate income tax rebate (capped at S$40,000) and the refundable investment credit (RIC) aimed at encouraging investment in high-value economic activities like innovation, R&D, and green initiatives can benefit Web3 startups and small-to-medium enterprises (SMEs). These measures can help reduce operational costs and provide additional funds for reinvestment into their businesses, contributing to the growth of the local Web3 ecosystem.

3. Investments in Innovation and Infrastructure:

The government's commitment to invest over $1 billion in the next five years to boost the nation's innovation ecosystem, coupled with upgrades to the Nationwide Broadband Network, can create a favorable environment for developing and adopting cutting-edge technologies like blockchain and Web3 applications. This enhanced infrastructure can attract more entrepreneurs, developers, and investors to the sector, fostering a thriving Web3 community in Singapore.

4. Alleviating Cost-of-Living Pressures:

Measures such as the S$600 Community Development Council (CDC) vouchers, the Cost-of-Living Special Payment for lower-income earners, and assistance with utility bills and S&CC payments for HDB households can help ease the burden of living expenses for individuals in the Web3 community who may have been affected by the pandemic or other economic factors. Additionally, the 50% personal income tax rebate (capped at $200) for the Year of Assessment 2024 and the S$4,000 SkillsFuture credit top-up for Singaporeans aged 40 and above can provide some relief and support for career development in the field of Web3 technology.

Overall, the Singapore Government's Budget 2024 seems to strike a balance between addressing pressing economic concerns and nurturing the growth of innovative sectors like Web3. While there are specific benefits for Web3 startups and SMEs, the broader focus on supporting businesses, investing in infrastructure, and alleviating cost-of-living pressures can contribute to a healthier and more conducive environment for the local Web3 community to flourish.