Tag Archives: SGD

Singapore, Brunei, and the $10,000 banknote

In 2014, Singapore stopped printing the mammoth S$10,000 banknote, one of the world's largest value banknotes, citing "risks associated with large value cash transactions." Although it is no longer being printed, the S$10,000, which is worth around US$7,400, remains in circulation and continues to be accepted as legitimate legal tender. But once deposited in the banking system, all S$10,000 notes will be returned to the Monetary Authority of Singapore (MAS)—the institution responsible for issuing notes and setting monetary policy—to be destroyed. With no new ones being created, the supply of S$10,000 can be expected to steadily shrink.

The title of world's highest-denomination banknote in production now passes to neighboring Brunei, which issues the B$10,000, also worth about US$7,400. Brunei, a small nation on the island of Borneo with a population of 450,000, is the world's fourth richest country (ranked by GDP per capita) thanks to its oil & gas reserves. Interestingly, due to a long financial relationship between Brunei and Singapore, Brunei dollars are considered to be "customary tender" in Singapore (more on that later). So even as the S$10,000 is slowly phased out, the B$10,000 may still have a backup role to play.

Singapore $10,000 from 1980 (discontinued issue)

Singapore and Brunei have an agreement—the Currency Interchangeability Agreement—dating back to 1967 which obligates the monetary authority of each nation to accept the banknotes of the other nation at par with their own currency. Private Singaporean banks can thus safely accept Brunei dollar notes for deposit, knowing that the MAS will not only buy these foreign notes at a one-to-one rate with Singapore dollars but will do so without charging a fee. Vice versa with Bruneian banks.

Singapore dollar denominations

MAS ships all the Brunei paper dollars it receives back to Brunei. Likewise, the Autoriti Monetari Brunei Darussalam (AMBD), Brunei's monetary authority, flies Singaporean dollars back to Singapore. According to this 2017 article, MAS has sent some B$1.3 billion annually to AMBD over the last three years. This is actually quite a lot of cash. Recent data from the AMBD shows that there is only about B$1.26 billion worth of Brunei banknotes and coins in circulation, most of this in the form of the B$100 note. Given that B$1.3 billion is shipped back each year to Brunei, the entire stock of banknotes circulates through Singapore once-a-year. Incredible!

While the B$100 note is the most popular Bruneian denomination, this hasn't always been the case. Through late 2011 and 2012, demand for the gigantic B$10,000 note exploded to B$1.5 billion, up from its regular level of around B$50 million. This spike was so marked (see below) that the entire supply of Bruneian banknotes effectively doubled, a situation that lasted until 2013 when a large quantity of B$10,000 banknotes were redeposited into the banking system. There is no indication what caused this pattern.

Brunei's money supply since 2011

As I mentioned earlier, the Singapore-Brunei Currency Interchangeability Agreement describes each counterpart's banknotes as "customary tender", differentiated from "legal tender." In Singapore, all currency notes and coins issued by the MAS are deemed legal tender. This means that any debt or transaction can be settled using MAS-issued banknotes, although if a payee (the person taking a payment) notifies a payer ahead of time, they can choose to avoid using legal tender and settle on an alternative means for transacting, say gold or euros. Since Brunei dollars are only customary tender, there is no default legal obligation on the part of retailers to accept them.

Modern $10,000 Brunei banknote

While many retailers in Singapore accept Brunei dollars, not all do. Offending retailers can be reported to MAS. And when they are reported, they usually comply.  Presumably this acceptance isn't forced on retailers, since Brunei dollars aren't legal tender, but is asked of them in good faith. Come on guys, take one for the team.

The monetary relationship between Brunei and Singapore is an old one. Prior to their independence, Malaysia, Singapore, and Brunei were all members of British-run currency board, the Board of Commissioners of Currency, Malaya, which issued Malayan dollar banknotes. The Board of Commissioners was initially established in 1899 by the British colonial authority. A currency board is a monetary system in which the issuer of banknotes (and deposits) maintains a 100% reserve for the liabilities it has issued. In the case of the Malaya currency board, this reserve consisted entirely of assets denominated in British pounds. The advantage of a 100% reserve is that there is no way that the peg can break, so investors needn't worry about exchange rate fluctuations.

1941 note issued by the Board of Commissioners of Currency, Malaya

Already merged on a monetary level, Malaysia and Singapore embarked on a post-independence political merger in 1963, but this political union fell apart in 1965. Ongoing distrust of the Malaysian administration by Singapore led to the abandonment of the currency board arrangement in 1967, with Malaysia, Singapore, and Brunei all issuing their own currencies for the first time. The three then drew up the Currency Interchangeability Agreement, obligating each to accept the others' banknotes at par, but Malaysia dropped out in 1973, leaving Brunei and Singapore. And this is how things stand to this day.

While the Singapore dollar is no longer based on a currency board—the MAS operates what is referred to as a managed float regime—the Brunei dollar continues to be operated on the principles of the old currency board. Rather than pegging to the British pound, the AMBD fixes the Brunei dollar against the Singapore dollar. However, the AMBD does not operate an orthodox currency board because it maintains a slightly-less-than full reserve of Singaporean dollar assets.

The monetary relationship between Singapore and Brunei constitutes a currency union, much like the Eurozone. In the same way that the European Central Bank calls the shots for the group of euro-using nations, the MAS is in charge of the Singapore dollar zone. Brunei is a passenger in this relationship, much like how Greece is along for the ride in Europe. Put differently, whereas Greece imports the monetary policy of a much more powerful authority, the ECB, Brunei imports Singaporean monetary policy.

Which brings us back to the $10,000 note. The denomination structure of Bruneian coin and note issue is the one bit of monetary sovereignty that Brunei gets to control. And since the Interchangeability Agreement obligates Singapore to accept all Brunei banknotes, Singapore effectively imports the denomination policy of its smaller neighbour. The $10,000 note is dead, long live the $10,000 note!

 

To understand the history behind the Brunei-Singapore monetary relationship, I relied on the following sources:

  1.  MAS Macroeconomic Review, April 2017. Pgs 73-76 [link]
  2. The Malayan Currency Board, 1938-1967. By Josephine George, 2016 [link]
  3. The Dissolution of a Monetary Union: The Case of Malaysia and Singapore 1963–1974. By Catherine Schenk, 2013 [link]
  4. Second separation: Why Singapore rejected a common currency with Malaysia. The Strait Times, May 24, 2016 [link]

 

BullionStar accepts cash payment, including the SGD 10,000 for bullion purchasesBullionStar accepts cash payment, including the SGD 10,000 note, for bullion purchases

BullionStar adds Ethereum, Bitcoin Cash, and Litecoin as Payment Options and Currencies

BullionStar is pleased to announce that it has added Ethereum, Bitcoin Cash and Litecoin as transactional currencies for both buy and sell orders on the BullionStar website.

Ethereum, Bitcoin Cash & Litecoin are now accepted as payment options and currenciesMany BullionStar customers are already be familiar with using Bitcoin when buying and selling gold, silver and platinum bars and coins, as BullionStar has been accepting Bitcoin as a form of payment since May 2014. BullionStar was one of the first bullion dealers worldwide to offer customers the ability to buy and sell physical precious metals using Bitcoin. Now with the addition of Ethereum, Bitcoin Cash and Litecoin, BullionStar is again one of the first bullion dealers in the world to offer customers the ability to transact in these other leading cryptocurrencies for both buy and sell orders.

With the addition of these three additional cryptocurrencies, BullionStar customers can now buy and sell physical gold bars, gold coins, silver bars, silver coins, platinum bars and platinum coins using Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BTC) and Litecoin (LTC), and by using any of six traditional currencies, namely Singapore Dollars, US Dollars, Euro, Australian Dollars, Japanese Yen, and Swedish Krona.

BullionStar constantly aims to add innovations to its product and service offerings, and the addition of Ethereum, Bitcoin Cash and Litecoin comes after careful analysis and following customer feedback. The addition of Ethereum, Bitcoin Cash and Litecoin now gives BullionStar customers extra choice when buying physical precious metals using cryptocurrencies, and allows for faster cryptocurrency transaction confirmation times.

Settle Bullion Orders in Ethereum, Bitcoin Cash & Litecoin

To pay using a cryptocurrency, select the preferred cryptocurrency in the "Currency" drop-down box at the top right hand section of the BullionStar hompage. Upon selection, all prices in the product listings will be displayed in terms of your selected cryptocurrency.

Select to pay in Bitcoin Cash, Ethereum and Litecoin

To purchase precious metals on the BullionStar website, you simply add the desired items to your shopping cart, go to the checkout and place your order.  If you have selected a cryptocurrency as currency, the checkout payment option will default to the selected cryptocurrency as well.

Upon placing your order, the order confirmation page and order confirmation e-mail will detail the cryptocurrency address to which you must initiate your payment within 20 minutes.

BullionStar will update you with a payment confirmation e-mail and an SMS text message as soon as we have received and processed your payment.

Likewise, for customers selling precious metals to BullionStar, proceeds can now be received in Ethereum, Bitcoin Cash and Litecoin as well as in Bitcoin.

Bitcoin, Bitcoin Cash, Ethereum & Litcoin as Currency

On the BullionStar website, all product prices for gold bars, silver bars, gold coins, silver coins, BullionStar Savings Program (BSP) and other precious metals products can now be displayed in Ethereum, Bitcoin Cash and Litecoin as well as in Bitcoin.

2.5 gram PAMP Gold Bar denominated in Bitcoins

Customers can also view spot prices, portfolio values and account history directly denominated in the newly added cryptocurrencies. For example, if you select 'Litecoin' from the Currency drop-down box on the top right of the BullionStar homepage, the spot prices and charts on the right hand frame for gold, silver, platinum and palladium are then displayed in terms of Litecoin (LTC) values. When logged in to your BullionStar account, your vault balance and cash balance will also be displayed in LTC if the Litecoin currency option has been selected.

BullionStar Charts

Ethereum, Bitcoin Cash and Litecoin have also been added as currencies within BullionStar Charts.

BullionStar Charts is a comprehensive charting facility which provides the ability to create price charts for precious metals, currencies, commodities, stock indexes, individual stocks (equities) and also in terms of the prices of BullionStar products.

BullionStar's charting functionality allow any two prices to be selected. For example, on the charting page select 'Precious Metals - Gold' then select 'Currency - Bitcoin Cash' to view a price chart of the gold price in terms of Bitcoin Cash.

Gold Price in Bitcoin Cash

Why Ethereum, Bitcoin Cash and Litecoin?

BullionStar has added Ethereum, Bitcoin Cash and Litecoin as transactional currencies  alongside Bitcoin because each of these three cryptocurrencies is widely-known and widely-used, and each of these cryptocurrencies is now firmly established in the marketplace.

Since its commercial launch in 2015, the Ethereum blockchain platform and its Ether coin have become a dominant force in the cryptocurrency space, and as well as transaction processing, Ethereum also supports smart contract functionality and the development of other cryptocurrency platforms.

Bitcoin Cash emerged in early August 2017 as a hard fork when it was split off from the Bitcoin blockchain. Bitcoin Cash has a larger blocksize than Bitcoin and facilitates higher transaction rates than Bitcoin which generally translates to faster payments and confirmations. In the 9 months since its launch, Bitcoin Cash has seen large-scale adoption by merchants and is now a stable and expanding competitor to Bitcoin.

The Litecoin platform and its coin, launched in 2011, are also based on the Bitcoin blockchain design, and Litecoin is now well established and known for its high-speed transfers rates and short confirmation times.

In terms of cryptocurrency market capitalization (market cap) or total outstanding market value of each coin, Ethereum, Bitcoin Cash and Litecoin have among the highest values of all crypto coins next to Bitcoin, and the global cryptocurrency trading market values the infrastructure of these cryptocoin networks, and most importantly, given that exchanges are forward-looking pricing mechanisms, the crypto currency market is signalling confidence in the longer term future prospects of these four cryptocurrencies.

Trade Directly between Cryptocurrencies and Precious Metals

With the ability to buy and sell precious metals using Bitcoin, Ethereum, Bitcoin Cash and Litecoin, BullionStar customers can now trade directly between investment precious metals and cryptocurrencies without having to first convert to fiat currencies. Traders can also now take profits from these cryptocurrencies and directly buy precious metals using their Ethereum, Bitcoin Cash, Litecoin and Bitcoin.

Trading between Ethereum and bullion for example, you can now buy gold bullion bars and gold bullion coins through BullionStar using Ethereum and hold these investment grade bars and coins in BullionStar's vault. All you have to do is transfer Ethereum from your Ether wallet or crypto exchange account wallet to the Ethereum address as indicated on the order confirmation from BullionStar. The same applies for Bitcoin Cash, Litecoin and Bitcoin.

Then in the future If you want to sell these gold bars and gold coins and take the proceeds in Ethereum, you just sell the precious metals for Ethereum and have the Ether transferred to your personal Ether wallet or crypto exchange account wallet. There is no need to first convert the Etheruem to US dollars to buy your chosen gold bar and coin products. Thus the intermediate step of converting the main crypto currencies to fiat currencies, such as US dollars is redundant.