Is Cryptocurrency Legal in Malaysia?
Cryptocurrencies: Not legal tender
Cryptocurrency exchanges: Legal, must register with the Malaysian Securities Commission
Although cryptocurrencies are legal in Malaysia, they are not considered legal tender. The country’s central bank, Bank Negra Malaysia, has issued a statement specifically confirming non-legal tender status for Bitcoin and advising the public to “be cautious of the risks associated with the usage of such digital currency”. In 2022, Malaysia’s Finance Minister suggested that the government’s attitude to cryptocurrencies was unlikely to change in the near future, stating: “Digital assets such as Bitcoin and Ethereum are not suitable to be used as a payment instrument… In general, digital assets are not a store of value and a good medium of exchange.”
Malaysia Cryptocurrency Regulations Overview
Cryptocurrencies: Cryptocurrency regulations in Malaysia draws on existing financial legislation. The Malaysian authorities typically consider cryptocurrencies to be securities and so tokens are regulated under securities laws and overseen by the Malaysian Securities Commission (SCM) under the authority of the Capital Markets and Services Act 2007.
Cryptocurrency Exchange Regulations: Malaysia regulates cryptocurrency exchanges under the Guidelines on Prevention of Money Laundering and Terrorism Financing for Capital Market Intermediaries 2014. Those rules were amended by the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019, and the Guidelines on Recognized Markets 2019.
Following compliance regulations and guidelines, cryptocurrency exchanges in Malaysia are required to register with the SCM in order to operate. The registration process involves a set of criteria, including requirements for exchanges to demonstrate the fitness of their senior management employees, and their ability to manage the AML/CFT risks associated with their business. Once successfully registered, cryptocurrency exchanges in Malaysia must abide by a set of AML/CFT obligations, which include implementing suitable customer due diligence measures and submitting reports on suspicious customer transactions to the SCM.
There are currently four registered digital asset exchanges operating under cryptocurrency regulations in Malaysia: Luno, MX Global, SINEGY Technologies, and Tokenize Technology.
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Future of Malaysia’s Cryptocurrency Regulations
While the Malaysian government has indicated that cryptocurrencies are unlikely to be accepted as legal tender, and continues to warn the public about their dangers, there are suggestions that a more flexible regulatory approach may be possible.
In March 2022, deputy communications and multimedia minister Datuk Zahidi Zainul Abidin from the Ministry of Communications and Multimedia (KKMM) publicly proposed potential reforms to cryptocurrency regulation in Malaysia. Specifically, he argued that certain crypto assets could be legalized in order to help younger Malaysians participate in the financial system. Zahidi called the crypto industry the “business and financial program of the future”, and added “we hope the government can try to legalize this matter so that we can expand the participation of young people in cryptocurrencies and help them in terms of energy consumption and so on”.
Malaysia has also started to explore the potential of a Malaysian central bank digital currency (CBDC). In 2021, Bank Negra Malaysia worked with counterpart institutions in Australia, Singapore, and South Africa to test the efficiency of a CBDC. The central bank said that its research was being focused on “proof-of-concept and experimentation to enhance our technical and policy capabilities, should the need to issue CBDC arise in the future”.
Explore the wider AML/CFT regulatory landscape in Malaysia in this article.
