Hi, This is Qadir A.K, Crypto lover, and Research Columnist.
Welcome to the next chapter of my writing series, ‘The Cryptocurrency Breakthrough 2020 – Synopsis 16’ Cryptocurrency Regulations in Malaysia
Malaysia, a multi-ethnic, multi-religious country with only half of the population consisting of the Malaysians and the rest, the minorities all over the world. Malaysia has the best economy in Asia with approximately 6.5% G.D.P every year. So, what’s the status of the cryptocurrencies in the country!!! Let us find out.
Government on Cryptocurrency
Cryptocurrency regulations in Malaysia have a questionable approach, not friendly as Japan Cryptocurrency regulations and Singapore but similar to those in India .debatable topic between the lawmakers and the regulatory bodies.
It was first in JAN 2019, the Malaysian cryptocurrency regulation came into effect. The
The cryptocurrencies are not considered as ‘legal’ in the country but that does not mean they are illegal. However, recently in Jan 2020, the Malaysian Government has made it clear by announcing that cryptocurrencies will not be banned but regulated. The Finance Minister of Malaysia, Johari Abdul Ghani said,
“No plans to ban cryptocurrencies in Malaysia, since doing the same shall curb creativity and innovation in the financial sector”
As per the officials, the government is in the process to ease out a little while forming regulations so that the corporates can avail the most for the future business opportunities. While the governor of the Malaysian Central bank, Muhammad Ibrahim, believes in a more transparent process in crypto business. He said,
“Basically, we will let the cryptocurrency promoters including Bitcoin, Ethereum and ripple to be more transparent, the methods to be more transparent and people behind the scene are to be more transparent too. By doing so, the public can decide on its own if they want to invest in cryptocurrencies,”
Country’s Regulations on Cryptos
Malaysia is one among the nations which were very uncertain of regulating the cryptocurrencies until last year. Nobody including the regulatory authorities had a clear perception of cryptocurrencies being legal or illegal.
Malaysia’s Securities Commission (SC) has now framed more strict and direct regulations on cryptocurrencies. The regulation classifies digital currencies, tokens, and crypto-assets as Securities placing them under the Securities Commission’s authority.
The exchanges are required to apply for the license from the regulator to operate in the country. The exchange will be granted a license only on the compliance of the regulatory rules. The exchange needs to:-
- Submit investment documentation of $1.2 million paid-up capital to the Central Bank of Malaysia (Bank Negara) for approval.
- Record and maintain the details of the participants and the transactions within the regulatory framework.
- Comply with the AML-CTF rules and also the approach applied to ensure the monetary safety of the customers.
- A work plan determining to collect data about there customers, their activities etc.
The exchanges which fail to comply with the above requirements will not be issued with a license and the exchanges which are operational will be subjected to closure.
To verify whether a crypto exchange is authorized to operate, individuals can refer to this link
Laws Imposed on Cryptocurrencies
Malaysian Laws require local exchanges register with the SC and later comply with the license requirements mentioned above. They will be provided 9 month time to do so.
Capital Markets and Service Order 2019
The law was made under the Capital and Service Act 2007, which set out the definitions of digital currency and digital tokens as ‘Securities’ for Malaysia’s securities law.
Under this law, the exchanges to register with SC to operate as ‘Recognized Operators’. The guidelines also established criteria for determining fit and properness of issuers and exchange operators, disclosure standards, trading rules and client asset protection.
The detailed Act can be accessed HERE
Anti-Money Laundering and Counter-Terrorism Act
The law would be applied for the persons or exchange which carries out activities listed below,
- Exchanging digital currency for money
- Exchanging money for digital currency
- Exchanging one digital currency for another digital currency
In February 2018, the Central Bank of Malaysia issued a policy document regarding digital currencies and AML-CFT which aims to ensure effective measures against money laundering and terrorism financing risks associated with the use of digital currencies and to increase the transparency of digital currency activities in Malaysia.
Taxation and Mining
Taxes imposed on Cryptocurrencies
The Inland Revenue Board of Malaysia (IRBM) which is responsible for the revenue and tax of the country. As per them, the cryptocurrencies regulations does not exempt the taxes on the traders. They would be subjected to Malaysian income tax law. The normal income tax or GST is implied on the cryptocurrency activities. However, there is no capital gains tax in Malaysia.
The Malaysian Government does not restrict the mining activities or trading neither the Central Bank regulate the mining activities. The mining in Malaysia receives immense competition from China and Eastern Europe.
The huge investments in mining equipment, pretty heavy usage of electricity plus lot of heat and noise produced has made mining a low profile job in Malaysia. On the other hand, the hard maintenance of the mining machines and long ROI plan has made mining unlikely means of investment in Malaysia.
Series of Events
04-04-2020:– Malaysia based cryptocurrency platform, Tokenize Malaysia obtained the license from the regulatory bodies to operate legally in Malaysia.
28-03-2020:– Binance announced its own debit card and also said the initial testing will be carried out in Malaysia.
19-01-2020:- The Securities Commission Malaysia publishes guidelines on digital assets.
17-01-2020:- Malaysian’s Securities Commission published a regulatory framework declaring the Initial Coin Offerings(ICO’s) as illegal and an Initial Exchange Offerings (IEO’s) the only legal means of conducting the token sales.
23-12-2019:- At a summit attended by the Muslim Countries, the Iranian president proposed in the creation of Muslim Cryptocurrency to cut the dependence on the US Dollar. Malaysian Prime Minister Mahathir Mohamad is open for the idea of unified Muslim Cryptocurrency.
06-11-2019:- Major bank HSBC has announced the enactment of letter of credit (LC) on blockchain in Malaysia.
15-01-2019:- Malaysian’s Securities Commission announced new digital currency and digital token regulatory rules. The SC also mentioned working with the Central Bank to develop regulatory framework for digital assets.
22-03-2018:- According to a report Published, the deputy Governor of the Central Bank of Malaysia, Jessica Chew Cheng Lian in a speech discussed the country’s desire to implement the Fintech and Blockchain technologies in the banking sector. She also said, nine banks have collaborated to develop blockchain applications for trade finance.
06-11-2017:– The Chairman of the Securities Commission at a finance conference said that the commission is working closely with the Central bank, Bank Negara Malaysia to work on the regulations and guidelines on the digital assets and cryptocurrencies. The chairman also said that they are working on a pilot program to research distributed ledger technology.
02-01-2014:- Central Bank of Malaysia announced that cryptocurrencies are not recognized as a legal tender and it does not regulate their operations. It also cautioned the public with the risks involved in dealing with cryptocurrencies.
The Malaysian Government has a warm approach with the cryptocurrency and its business in the country. No doubt they have implemented the necessary regulations, but still, the taxation policy on them is unclear.
The future of the cryptocurrencies in the country would be still brighter when firm rigid regulations and laws are implemented.