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Reminder: Crypto currencies are not legal tender
SINGAPORE'S Ministry of Law (MinLaw) has reiterated that crypto currencies are not legal tender and businesses should do due diligence before accepting this form of payment.
The ministry introduced a Bill last week to tighten money laundering and terrorism financing rules in the precious stones and metals industry - just days before Catalist-listed SK Jewellery said it planned to accept some crypto currencies in its stores.
SK Jewellery had announced last Friday that it would partner Singapore-based point-of-sale systems startup Bizkey Network to roll out crypto currency payment at its stores island wide, starting with the new SK Gold branch at The Shoppes at Marina Bay Sands.
When contacted, a spokesman told The Business Times that the group has always complied with regulations and its imminent acceptance of crypto currency will be no exception.
Since 2014, precious stones and metals dealers have had to file suspicious transaction reports "upon reasonable suspicion or knowledge of criminal conduct" in a cash transaction reporting regime for the industry.
Police guidelines note that the filing of such reports "is not limited by the mode of transaction or the amount, and includes attempted or uncompleted transactions".
The new Bill that has gone before Parliament will require regulated dealers in precious stones and metals to carry out money laundering and terrorism financing risk assessments, as well as introduce internal protocols to mitigate the risks identified.
They must take into account the types of products and services being offered and the transactions that are done.
A spokesman for MinLaw has told BT that the government is aware of potential money laundering and terrorism financing risks in crypto currency, and is closely watching developments both here and abroad.
While crypto currency has not been addressed specifically by regulations on the industry, all forms of payment are covered by the requirement to file suspicious transaction reports, the MinLaw spokesman confirmed over the phone.
Cash transactions of more than S$20,000 in one day to a single customer, or known agents of that customer, must be reported.
BT understands, though, that MinLaw does not have explicit guidelines on whether the use of crypto currency to pay for precious stones and metals is inherently suspicious. The onus is on dealers to make the judgment call.
Bizkey says the jeweller will implement a daily S$5,000 cap on such transactions as a safeguard.
Giving the rationale for the move, SK Jewellery chief executive Daniel Lim had said in a statement last Friday that accepting crypto currency allows the group to reach "a wider pool of customers, namely, the millennials and the more tech-savvy generation".
The SK Jewellery spokesman told BT that the group sees the initiative as a way "to partake in the growth story of the digital economy without exposing itself to unnecessary volatility in the crypto currency markets". It would also enable SK Jewellery to reach customers beyond Singapore.
The spokesman said: "The acceptance of crypto merely serves as another option of payment for our customers and, other than it being a more unconventional mode of payment now, it's business as usual."
Bizkey and SK Jewellery have launched a week-long "Token Day" campaign, which runs until Jan 27, at the Marina Bay Sands store. The jeweller touted discounts of 10 per cent to 20 per cent for crypto currency payments on diamonds and gold.
Bizkey reported that such transactions crossed S$30,000 across three two-hour flash sales. A Binance crypto currency event was held on those days at the nearby convention centre.
Bizkey CEO Huang Liang, who also goes by the name Ken, told BT over the phone that currency conversion will be done between Singdollar retail prices and customers' coin of choice at the point of sale, with the exchange rate based on the coin's prevailing market value.
Under a memorandum of understanding with SK Jewellery, Bizkey will enable payment with six crypto currencies: TrueUSD and Dai, billed as "stablecoins" tied to the value of the greenback, Binance, DigiFinex Token, Ethereum and Bizkey's own BZKY token. (See amendment note)
Mr Huang said: "SK didn't negotiate for these coins. We proposed to them to work with coins that are more widely used and have bigger reach."
Bizkey handles the conversion back to fiat currency for SK Jewellery with a settlement period of one business day. It will charge a processing fee, which is now 1 per cent.
Mr Huang told BT that SK Jewellery is the first jeweller client for his firm, which he set up last year and which has a paid-up amount of S$200,000. He has a 30 per cent stake, with the rest owned by his co-founder and chief operating officer, Chinese national Zhang Xiaohang, or Scarlett.
Despite the recent tie-up, other industry players seem less keen on cryptocurrencies.
The Singapore Jewellers Association declined to comment when approached, with an officer saying it was not in a position to advise on a commercial decision by a member.
Meanwhile, a spokesman for Catalist-listed TLV Holdings, owner of the Taka Jewellery brand, said the group has no immediate plans to roll out crypto currency payment.
Noting that MinLaw's new Bill calls for precious stones and metals dealers to have internal controls and mitigation measures, the ministry spokesman told BT: "This would include consideration of the risks posed by non-cash - for example, crypto currency-based - transactions.
"Therefore, businesses which choose to accept crypto currency payments should ensure that they have sufficient measures in place to mitigate potential money laundering and terrorism financing risks, which may arise from these modes of payment.
"In addition, businesses should perform their due diligence before accepting crypto currency payments, as crypto currencies are not legal tender."
Asked what know-your-customer (KYC) measures have been put in place, Mr Huang said his firm has no control over crypto currency issuers' processes, "but, going forward, when we deploy our own wallet, we will do KYC for our customers".
Amendment note: An earlier version of this article incorrectly stated one of the crypto currencies accepted by SK Jewellery. It is DigiFinex Token, not DraftCoin. The article has been corrected to reflect this.