Malaysia is a Southeast nation that occupies parts of the Malay Peninsula and the Island of Borneo. It’s famous for its beautiful beaches, dense rainforests, and a mix of several cultural influences. Malaysia consists of 13 states and three federal territories, all separated by the South China Sea into two regions, Malaysia Borneo and Peninsular Malaysia. It has one of the foremost economic records in Asia with a constant growing GDP of 6.5% annually. It’s the third largest country in ASEAN (Association of Southeast Asia Nations) falling behind Thailand and Indonesia. On a global scale, it’s the 28th largest in the world.
Natural resources have always fueled Malaysia’s economy. However, recently, the economy is expanding in the sector of tourism, medical tourism, science, and commerce. It has a newly industrialized economy that ranks as the 4th largest among Southeast Asian countries. The country has a GDP per capita of $10,430 and an HDI of 0.789. Because of this, both IMF and the World Bank have classified Malaysia as an emerging economy. Malaysia’s infrastructure is also one of the most developed in Asia ranking in the 8th position. The country also has a superior telecommunications network with over 30 million cellular subscribers. Of late, Malaysia has been seeing some exciting times concerning cryptocurrencies.
State of Cryptocurrencies Globally
Different state authorities around the world have mixed feelings about the adoption of cryptocurrencies. A large number of states have sent out several warnings to residents in regards to digital currencies especially warning investors to stay away from them. The most commonly stated reason for issuing warnings has been investor protection from fraud and loss. A majority of the countries are looking into ways to regulate digital currencies. However, a few of these states have outright banned them. Some examples include Vietnam, Morocco, Bolivia, and China. They have forbidden all cryptocurrency activities within their borders.
Altogether, not all countries see blockchain technology or cryptocurrencies as a threat. Some of these countries (recognizing the potential behind digital currencies) are developing a cryptocurrency-friendly atmosphere to attract investments in the sector. Some of these countries include Spain, Belarus, the Cayman Islands, Malaysia, and Luxemburg. Other countries are going a different route and are researching how to launch their own (centralized) national cryptocurrency. A significant number of countries have accepted digital currencies as legit payment methods, with Mexico being a great example. And yet, some countries are making a distinction between cryptocurrencies and blockchain technology and are treating them very differently.
Current State of Cryptocurrencies in Malaysia
The state of Malaysia does not recognize digital currency as legal tender. Therefore, digital currencies can’t be used as a means of exchange. Moreover, cryptocurrency businesses are not covered by market conduct standards that apply to financial institutions regulated by Bank Negara Malaysia (BNM). Despite this, digital currency trading and investing are entirely legal and active in the country. The state allows them as long as trading activities are done without any malicious intent and with regulations in mind. The state encourages exchanges to report suspicious activities or transactions to Malaysian intelligence agencies and financial regulators.
Malaysia joins the list of states that have recently implemented cryptocurrency regulations. Although it took the state authorities a bit of time to do this, it finally provided a robust regulatory framework that’s both favorable and beneficial to players in the industry. This regulatory framework aims to enhance transparency, protect the integrity of the financial system, and strengthen incentives to safeguard against abuse from illegal activities. BNM enforced the regulatory framework after consultation with relevant stakeholders for over a year. On the 27th of February 2018, BNM released a policy statement that outlined Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) guidelines for crypto-trading.
Before all this, BNM had released an exposure draft on its desired digital currency regulation on the 14th of December 2017 and asked for public opinion. Public feedback and consultation ended in February this year, and the finalized policy statement was completed and released at the end of February. This made cryptocurrency trading in Malaysia entirely legal. Thus, the state’s new policy guidelines came into effect, compelling all Malaysian crypto-exchange platforms to adhere to Know Your Customer (KYC) policies. All cryptocurrency exchanges in Malaysia are, therefore, mandated to collect personal customer information including ID documentation.
Future of Cryptocurrencies in Malaysia
It’s becoming clear that BNM does not intend to accept cryptocurrency as legal tender any time soon. BNM’s governor explicitly stated that the state of Malaysia would neither ban nor recognize cryptocurrencies. He also went ahead to state that the future of cryptocurrencies in the state will largely depend on public opinion. Hopefully, if cryptos become more mainstream in the country, then the state might consider using them as legal tenders in the future. Unlike some other Asian countries, the state of Malaysia has not imposed a complete blanket ban on cryptocurrencies.
The current financial system isn’t as optimal as one would want it to be. Often it fails to serve the individual and is unfair to the underprivileged in society. In recent times, large traditional players are entering into the space, making investments in companies such as Coinbase. They do this to gain traction in this new and growing space. Digital currencies could allow for a genuinely open, safe, and fair financial system for all industry participants (although currently, traditional cryptocurrencies like Bitcoin are extremely volatile, and perhaps even manipulated – many people have lost a lot of money while speculating in crypto). Even though the markets remain discouraging, we remain hopeful and confident for the future of cryptocurrencies.
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