Cryptocurrency payments in Singapore: Would you pay $500M for a pizza?

Cryptocurrency payments have been growing in popularity since the Monetary Authority of Singapore introduced its first regulations on cryptocurrencies in 2019.

For example, local entertainment brand Zouk Group announced in early February that it would accept digital currency like Bitcoin at its establishments. E-money institutions like Revolut and banks such as DBS allow users to buy, hold and exchange cryptocurrencies on their platforms.

Meanwhile, retailers and service providers like Grab and iStudio offer crypto payment options for online purchases.

That said, using cryptocurrency for transactions is not essential today, though it does offer certain advantages over paying in Singapore dollars or other fiat currencies (government-issued currencies that are not backed by a precious metal) – particularly for those who already own cryptocurrencies.

How do crypto payments work?

There are two ways to pay for your purchases using cryptocurrency – directly or through a payment gateway. Making a direct payment is similar to paying in cash or via Paynow: You transfer funds from your own crypto wallet or account directly into the recipient’s wallet or account. This is typically done using a QR code or wallet address provided by the retailer, and you’ll need to authorise the transaction through your crypto wallet.

A crypto payment gateway functions like a traditional payment gateway (such as Paypal, Adyen, or Stripe) when making purchases online – and sometimes offline. It acts as an intermediary, instructing your bank or crypto wallet to transfer funds to the retailer. A specified amount of cryptocurrency is withdrawn from your account and deposited into the retailer’s account.

Since most retailers do not have crypto wallets or accounts, they usually opt to have cryptocurrency payments converted into their local currency before the funds are deposited into their bank accounts – similar to how foreign currency transactions are processed.

Payment gateways facilitate this currency exchange process, making cryptocurrency transactions more convenient for both customers and retailers.

For the average person, paying with cryptocurrencies is not always the best choice. There are some aspects that are advantageous for you, and others that fall short of what traditional payment methods can offer.

The benefits

BETTER PRIVACY Paying with crypto typically doesn’t reveal your personal information to the other party, including things like your name. This doesn’t mean digital payments are 100 per cent traceless. If used for nefarious purposes, crypto is actually much easier for authorities to track compared to cash.

LOWER FEES COMPARED TO CREDIT CARDS Crypto payments typically cost just a few cents per transaction, depending on the blockchain used to record the transaction. In contrast, payment processors like Paypal or Stripe can charge fees of 3 per cent or more per purchase – even using a Visa card can incur similar costs.

This is partly because a crypto payment functions like a debit transaction, where you pay with money you already own, rather than accumulating credit that must be repaid later.

SETTLEMENT SPEED Crypto payments settle faster than credit card or bank payments. However, you don’t really see it happening on your end – when you tap your card or enter your bank details at a restaurant or online store, the payment seems to go through in seconds. 

The drawbacks

A STILL-GROWING TREND Crypto payments are spreading, with higher adoption rates in travel, cross-border shopping and entertainment in crypto-friendly places like Singapore. However, they still aren’t an option for the large majority of merchants yet, just the more forward-thinking ones.

It’s still a technology that is considered to be in the early adopter phase, which means you might feel very cool doing it, but only when you manage to find a merchant that accepts it.

PRICE VOLATILITY If you are paying in a cryptocurrency like Bitcoin (BTC) or Ether (ETH), you’ll be taking that cryptocurrency out of your account at the market price at that moment. If you were holding that crypto as an investment, this will mess up your investment plans. .

If the price of the asset happens to be down when you make the purchase, you may be locking in a loss on your crypto investment.

LESS PROTECTION Crypto payments, even those executed through a payment gateway, are final when done. As transactions are recorded on a decentralised ledger known as a blockchain, there is no central authority to turn to if you want to “undo” an erroneous transaction. Traditional banking protections like reversible charges aren’t available.

So you want to explore crypto. What should you do?

Curious about cryptocurrency? Here’s a quick 101 on what you should know.

EDUCATE YOURSELF Learn how wallets work and how to buy cryptocurrencies. Get familiar with using crypto wallet keys, even if you end up keeping all your cryptos in a centralised exchange, because ultimately, you want to know how the system works.

UNDERSTAND THE RISKS Owning and spending cryptocurrencies will expose you to several risks, depending on how you are using the technology. If you are using decentralised wallets, it is entirely possible for you to lose access to the wallet and all its contents if you forget your seed phrase – a randomly generated set of words that serves as a key to access or recover cryptocurrency funds – or if someone else learns your seed phrase.

If you are holding cryptocurrencies that have price volatility like Bitcoin (BTC) or Ether (ETH), you will experience volatility risk as the price fluctuates. Learn how to mitigate and navigate the different risks of holding cryptocurrencies.

SIGN UP AT A RELIABLE EXCHANGE OR BANK Start with an account at a reputable bank or a well-known crypto exchange that is regulated by MAS. Buy your cryptocurrencies there to start with. These institutions usually also have good educational resources that you can tap into.

START SMALL Don’t invest a large portion of your savings in crypto when starting out. Begin with a few hundred dollars to experiment with transactions, buy and sell on an exchange, or explore cryptospecific activities, like staking (where you’ll earn rewards for simply keeping your coins in wallets without spending them).

Be mentally prepared to spend – or even lose – a portion of your initial investment. Remember, if you don’t fully understand what you’re doing, it’s not an investment. Focus on learning first.

Final word

While crypto payments can add flexibility to your financial toolkit, like any new technology, they are best approached with caution.

A TL;DR on crypto payments

• Paying with crypto is similar to paying in a foreign currency.
• There are two ways to pay: wallet to wallet or through a payment gateway. Compared to payment methods like Visa and Mastercard, transaction fees are lower, but there may be exchange fees.
• In order to pay in crypto, you need to own crypto first, which has its own learning curve and set of risks.
• If you really want to start adopting crypto, it is recommended that you start small, educate yourself, and be aware of the risks.

Daniel Yap is the former global lead for Binance Academy and HTX Learn. His teams helped guide and educate hundreds and thousands of crypto users on topics ranging from technology to trading.