Malaysia has embarked on its digitalisation journey in recent years, with the rapid development of virtual currencies, different regulatory policies have been introduced in various regions worldwide. Based on research, here are the relevant news briefings and compiled a series of articles on “Global Policies on Virtual Currencies” to help everyone understand the regulatory attitudes towards virtual currencies in different regions around the world. Let us learn about Malaysia’s virtual currency policy.

Overall assessment of policy openness:

1. Bank Negara Malaysia (BNM) stated that there is currently no plan to issue central bank digital currency (CBDC).

On March 31, 2021, Bank Negara Malaysia (BNM) stated that there is currently no plan to issue central bank digital currency (CBDC), and that existing monetary and financial policy tools are still effective in maintaining currency and financial stability. Domestic payment systems, including the real-time retail payment platform (RPP), will continue to operate to support economic demand. Most current digital assets do not possess universal characteristics of currency, thus making it difficult to store value and conduct transactions. BNM will actively monitor key indicators, assess CBDC-related risks and policies.

2. Revised Guidelines on Digital Assets in Malaysia

On October 28, 2020, the Securities Commission Malaysia (SC) announced that the revised “Guidelines on Digital Assets in Malaysia” had officially taken effect. The guidelines were reportedly issued to better regulate the development of Initial Exchange Offerings (IEOs) and Digital Asset Custodians (DACs), promote responsible innovation in the digital asset field, effectively manage risks, and protect the interests of investors. In January 2020, the SC announced a framework that allows companies to raise funds in Malaysia by issuing digital tokens through an IEO platform registered with the SC. The new guidelines require IEO platform operators to conduct necessary due diligence on issuers (including reviewing disclosure information in the issuer’s proposal and white paper) and assess the issuer’s ability to comply with the Guidelines and the Anti-Money Laundering and Counter Financing of Terrorism Guidelines. Additionally, the Guidelines also recognize the important role of digital asset custodians in Malaysia’s digital asset ecosystem and impose relevant operational requirements. The SC reminds the public that no digital assets may be offered, issued, or distributed in Malaysia without obtaining registration authorization from the SC. Any illegal activities confirmed may be subject to a maximum fine of 10 million ringgit and/or imprisonment of up to ten years. After the Guidelines take effect, interested parties who wish to register as an IEO platform operator or DAC institution in Malaysia may begin submitting applications to the SC, with the deadline for IEO platform operator applications being February 15, 2021.

3. Updating Legal Framework

In 2018, Malaysia updated its legal framework with regulatory rules for cryptocurrencies, and entities such as exchanges, traders, and organizations converting non-regulated funds were termed “reporting agents”. The authority over this domain was given to the central bank of the country (Bank Negara Malaysia) and the primary regulatory body, Securities Commission. It was mandated to regulate relationships within the ICO framework and issue licenses for the exchange of cryptocurrencies.

4. New AML/CFT Regulations Include Cryptocurrency Activities

In 2018, Malaysia introduced new anti-money laundering and counter-terrorism financing (AML/CFT) regulations that also encompassed cryptocurrency activities. The new policy requires Malaysian cryptocurrency exchanges to operate with strict KYC requirements and conduct due diligence on all customers, with the aim of increasing transparency in local digital currency activities and ensuring the healthy development of the entire financial system. The objective of the Bank Negara Malaysia in introducing this new policy is to “enhance transparency in Malaysia’s digital currency activities” while also “ensuring effective measures are in place to counter the risks associated with the use of digital currencies for money laundering and terrorism financing.” The law was enacted on February 27. Bank Negara Malaysia stated that it “considered feedback received during the public consultation period following the publication of the draft on December 14, 2017.” The bank added that the feedback received “related mainly to the obligations of cryptocurrency exchanges and companies providing intermediary services related to cryptocurrencies.”

5. Bank Negara Malaysia: Does Not Recognize or Prohibit Virtual Currencies

In February 2018, Bank Negara Malaysia declared that it does not recognize virtual currencies as legal tender but also does not prohibit their trading, while striving to make them more transparent. The bank governor, Muhammad Ibrahim, announced that the authority would release a concept paper on virtual currencies this month, shedding light on virtual currencies such as Bitcoin, Ether, and Ripple, as well as their promoters, circulation, and operational methods. He stated that the authority does not intend to ban the trading of virtual currencies but will work towards making it more transparent.

6. Regulatory Guidelines for Cryptocurrency

In 2017, Malaysia released regulatory guidelines for cryptocurrency to address risks related to money laundering and terrorism financing in Malaysia. In addition to Bitcoin, virtual currencies recognized by Malaysia include Ether, Zcash tokens, Dash, Tezos tokens, and Monero.

Our Summary

There always has room for this. Based on the above analysis, Malaysia’s cryptocurrency regulatory policies fall under the category of “open for discussion”.