Malaysia’s approach to cryptocurrencies has been one of skepticism which has since evolved significantly over the years. In 2014, the country was cautious, with Bank Negara Malaysia stating that Bitcoin and other cryptocurrencies weren’t legal tender. Fast forward to 2024, the country’s approach to cryptocurrencies looks a little different.
Today, cryptocurrencies are legal in Malaysia, though not recognized as official currency. Instead, they are regulated as securities by the Securities Commission Malaysia (SCM). This shift to regulated acceptance has opened new opportunities for enthusiasts and investors. So what does that mean for you? Does this mean trading, buying, and selling cryptocurrencies freely? Not so fast; this article breaks down what you can and can’t do with cryptocurrencies, the current regulations, and the potential risks.
Legal Status of Cryptocurrency in Malaysia
Cryptocurrencies are legal to own and trade in Malaysia. They are not legal tender, which means that you are allowed to invest in cryptocurrencies like Bitcoin. However, you cannot use them as a primary form of payment for goods and services in the country. This extends to all domestic businesses and individuals living in Malaysia.
However, using cryptocurrencies like Bitcoin on foreign business platforms falls into a regulatory gray area. For instance, if locals use cryptocurrencies on international e-commerce platforms or at Malaysian online casinos, these platforms do not fall under the regulations set out by the SCM. Value Walk’s Michael Graw explains how offshore online casinos operate outside of the Malaysian jurisdiction. He adds that Malaysia’s gambling laws have not changed since the introduction of the 1953 Betting Act, which predates online casinos and the Internet. This means that players can use Bitcoin as a payment method for deposits and withdrawals playing blackjack, poker, and more.
The SCM serves as the country’s main regulatory body overseeing cryptocurrency activities. Their role is crucial in shaping crypto regulation and ensuring investor protection. A significant development came with the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019. This order classified cryptocurrencies as securities, placing them under the same regulatory umbrella as traditional financial instruments like stocks and bonds.
This classification has important implications:
- It brings cryptocurrency activities under the purview of Malaysia’s securities laws.
- It provides a framework for regulating digital asset exchanges and other crypto-related businesses.
- It aims to offer some level of protection for investors while allowing for innovation in the fintech sector.
- By treating cryptocurrencies as securities, Malaysia has taken a middle-ground approach. This approach allows for the growth of the crypto industry while maintaining regulatory oversight to mitigate potential risks.
What You Can Do With Cryptocurrency
Despite the use of cryptocurrencies being legal and regulated, the use of cryptocurrencies is limited to:
- Trading: You are allowed to buy, sell, and trade cryptocurrencies on licensed digital asset exchanges. The SCM has approved several exchanges and only 14 cryptocurrencies have been approved for trading purposes.
- Investment: Cryptocurrencies can be used as investments. Since many Malaysians view cryptocurrencies like Bitcoin and Ethereum as a potential store of value, it allows investors to use crypto to diversify their investment portfolios.
- Holding: You are allowed to store cryptocurrencies in digital wallets for long-term holding or speculation on future value increases.
- Limited payments: While not widely accepted, some businesses in Malaysia are allowed to accept certain cryptocurrencies for goods and services.
- Cross-border transactions: You are allowed to use cryptocurrencies for international transfers, although this may fall into a regulatory gray area and may have potential tax implications.
In other words, you can use crypto to try and make a profit (investing and trading), but its use as a payment method remains limited at this time.
What Not to Do with Crypto in Malaysia
Despite the growing uses of crypto, there are still a few things you cannot use it for in Malaysia, including the following:
- Use as legal tender: Cryptocurrencies cannot be used as an official means of payment for goods and services in Malaysia since it is not recognized as legal tender.
- Trade on unregulated platforms: Engaging with unlicensed exchanges is illegal and risky. Only use cryptocurrency exchanges approved by the SCM to ensure compliance with local laws and protect your investments.
- Ignore tax obligations: Profits from cryptocurrency trading will be subject to taxation. Failing to report crypto-related income or capital gains could lead to legal issues.
- Bypass AML/KYC procedures: Compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) procedures is mandatory when using regulated platforms.
- Operate exchanges without approval: Running a cryptocurrency exchange without proper registration and approval from the SCM is prohibited and can result in severe penalties.
- Engage in illegal mining: Unauthorized crypto mining, especially when it involves electricity theft, is strictly forbidden. This activity has caused significant damage to Malaysia’s energy sector.
- Disregard the Travel Rule: Digital asset service providers must adhere to the Travel Rule, which requires sharing information about the originators and beneficiaries of digital asset transfers.
In summary, always ensure that proper care is taken when using crypto to avoid engaging in illegal activities.
Conclusion
As the cryptocurrency landscape gradually changes in Malaysia, the regulations could potentially change in the future. By promoting responsible crypto use, the country could balance innovation and preserve financial stability. Malaysia can refine its approach to cryptocurrencies following successful regulatory models in Singapore and Japan.
