The complete guide to converting your SGD to USD stablecoins (Aug’21)
Welcome back crypto fam!
In the previous article, I talked about how you should choose which crypto exchanges to use depending on the kind of crypto investor you are. If you haven’t already read it, here is the link; reading it will provide context for this piece.
In this article, I’ll briefly go through what stablecoins are, why we need them, and the process of converting SGD to stablecoins for a Singaporean crypto investor.
First, what is a stablecoin?
Essentially, stablecoins are tokenized versions of USD. Their issuance is always collateralized by a basket of USD and USD-dominated securities so that you can trust their value peg. Private companies issue them, and you can think of them as another crypto token that is always worth $1 USD approximately. A few of the more popular choices are USDT, USDC, and BUSD.
As the native currency of the crypto world, stablecoins provide a standard unit of account to USD and are commonly adopted by crypto investors and traders. There is certainly utility in using and holding stablecoins, and here are some reasons why I use them:
- To earn high interest on certain crypto platforms/exchanges.
- To trade crypto derivatives.
- To temporarily take profit when I expect a market pullback.
As a Singaporean crypto investor, there are currently three viable methods to convert your SGD into a USD-denominated stablecoin:
- Gemini (Xfers as backend gateway)
- Binance.com P2P exchange
- Stockbrokers, e.g., Interactive Brokers (IBKR)
Buying through Gemini or Binance.sg
As I have mentioned previously, exchanges that allow you to purchase crypto with SGD directly, such as Gemini or Binance.sg, are the most convenient way for Singaporean investors to venture into the crypto world.
One caveat though, both Gemini and Binance.sg do not offer direct purchases of popular stablecoins such as USDT, USDC, and BUSD. Users have to send the purchased crypto tokens to other exchanges like Binance.com or FTX to sell them into stablecoins.
However, if your objective is to hold stablecoins and earn high interest on them, Gemini’s stablecoin GUSD fulfills that role perfectly, with the help of Blockfi.
Remember Blockfi? It’s not mentioned in the previous section because you cannot buy/sell/trade crypto on it as a Singaporean investor. However, when you deposit crypto or USD into Blockfi, you can still earn a nice interest in its Blockfi interest account. Details
There are two ways to do this:
- Deposit USD into Blockfi. It will be automatically converted to GUSD.
- Buy GUSD with SGD on Gemini exchange, and withdraw to Blockfi.
One thing to note is that Gemini only offers GUSD, so you can’t convert your SGD into the other more popular stablecoins, such as USDT, USDC, and BUSD.
Buying through Binance.com P2P exchange
The second method is the Binance.com P2P exchange. Think of it as the Carousell for USDT/USDC/BUSD. Sellers are individuals who use the P2P exchange as a platform to offer a service of converting your SGD into USDT for a profit.
Here is an overview of the steps involved:
- Initiate a buying process on the P2P exchange.
- Contact the seller for their Paynow or bank account details.
- Transfer SGD to them via Paynow or bank transfer.
- Receive the USDT in your Binance account.
This is a very convenient way to buy USDT for crypto derivatives trading, as Binance also happens to be one of the largest exchanges with the deepest liquidity.
Buying through stockbrokers
The last method is to convert your SGD to USD in any traditional stockbroker such as IBKR and withdraw the USD to your crypto exchange account. It’s one of the cheapest but most laborious methods. I will briefly explain it here and go through it in detail in future articles.
To know why this method is one of the cheapest, you’d need to understand that the most significant slippage occurs when you convert SGD to USD with unfavorable Forex rates. There might also be transfer fees involved, but it’s often just a flat fee that gets increasingly negligible with larger transactions. Most platforms also offer a limited number of free transfers per month, which we need to make full use of.
If you go through a bank to deposit USD into crypto exchanges via international remittance, you are subjected to unfavorable Forex rates. Furthermore, you might even get charged a draft fee on top of that.
With that in mind, you’ll appreciate that using a stockbroker has two distinct advantages:
- You can convert SGD to USD at the spot rate, which is very advantageous.
- You can withdraw the USD to the international bank account that your exchange uses for free! (IBKR offers 1x free withdrawal per month)
I’ve been using IBKR since the start of my investing journey, and it has served my trading needs very well. I get to buy USD at a tight bid/ask spread and only pay a flat fee of $2 USD for most cases.
Once I’ve converted my SGD to USD in the IBKR account, I’ll withdraw to my Blockfi account, where the USD is immediately converted to GUSD. I can then leave it there to earn interest or transfer to other exchanges if I want to trade or do DeFi.
Alternatively, you can also withdraw to crypto exchanges that offer USDT and USDC like Kraken.
Cost comparison of different buying options
I’ll make a comparison to illustrate the cost differences across options. I will be throwing in DBS remit as one of the options because it is a popular remittance option due to its ease of use and waived remittance fees.
The following screenshots show the Forex rates across different methods. They were all taken around the same time.
Let me extrapolate them for your viewing ease (lowest to highest):
- Gemini’s SGD-GUSD rate: 1.354 (Aug 15, rate=1/0.73854)
- Oanda’s reported spot rate: 1.35515 (mid of 1.35416/1.35614)
- DBS’s offered exchange rate: 1.365
- Binance.com P2P’s quote rate: 1.373 (Lowest among reliable sellers)
Suppose we started with $1000 SGD. This is how much stablecoins we would receive at the end:
- Gemini SGD to GUSD $738.55 (baseline)
- IBKR to Blockfi GUSD: $735.92 ($2.63 less)
- DBS to Blockfi GUSD: $732.60 ($5.95 less)
- Binance.com SGD to USDT: $728.33 ($10.22 less)
As the Forex rate is a flat percentage, the fees involved only increase as the transacted amount gets larger. Let’s demonstrate this with a $5000 SGD example.
- Gemini SGD to GUSD $3692.76 (baseline)
- IBKR to Blockfi GUSD: $3687.62 ($5.14 less)
- DBS to Blockfi GUSD: $3663.00 ($29.76 less)
- Binance.com SGD to USDT: $3641.66 ($51.10 less)
You get the point.
Gemini is the cheapest option here, ̶b̶u̶t̶ ̶d̶o̶ ̶r̶e̶m̶e̶m̶b̶e̶r̶ ̶t̶h̶a̶t̶ ̶G̶e̶m̶i̶n̶i̶ ̶p̶a̶r̶t̶n̶e̶r̶s̶ ̶w̶i̶t̶h̶ ̶X̶f̶e̶r̶s̶ ̶a̶s̶ ̶t̶h̶e̶ ̶l̶o̶c̶a̶l̶ ̶p̶a̶y̶m̶e̶n̶t̶ ̶g̶a̶t̶e̶w̶a̶y̶ ̶s̶o̶ ̶i̶t̶ ̶i̶s̶ ̶s̶u̶b̶j̶e̶c̶t̶e̶d̶ ̶t̶o̶ ̶t̶h̶e̶ ̶3̶0̶k̶ ̶S̶G̶D̶ ̶a̶n̶n̶u̶a̶l̶ ̶l̶i̶m̶i̶t̶.̶ Edit 3/9/21, I have been informed that although Gemini uses Xfer as the backend gateway to facilitate SGD transfers, it is NOT subjected to the usual 30k Xfers limit!
At this point, you might be super confused, so how do I choose? No worries mate, let me give you the quick and dirty:
If you want to earn interest on your stablecoins, use Gemini exchange.
If you want to trade or do DeFi/NFT, you can still choose Gemini for its ease and favorable fees, but there are extra steps of withdrawing your crypto to another exchange and selling them into USDT/USDC/BUSD.
Alternatively, make use of your stockbroker to transfer USD into your crypto exchange accounts. If you urgently need USDT, buying through Binance.com P2P exchange is the quickest way. Of course, you’d be paying for that convenience.
Thanks for reading till this point. If you are still unclear about anything, I will make a step-by-step guide for ya’ll in future articles.
Please also give my Twitter @SingaporeHODL a follow if you find the content useful!
