The global frenzy around cryptocurrencies has seen prices fluctuate dramatically over the past year, leading to a growing interest among Malaysian investors. The Central Bank of Malaysia (BNM) has repeatedly maintained its position that digital currencies are not legal tender in Malaysia, and has advised the public to be cautious of the risks that come with them.
While there are no specific Malaysian regulations governing cryptocurrencies or their exchanges, the Malaysian Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 was amended to include digital currency exchange businesses as reporting institutions. Complementing this, BNM recently issued the ‘Anti-Money Laundering and Counter Financing of Terrorism – Digital Currencies’ guidelines. This, together with a recent freeze on the bank account of a Malaysian subsidiary of a London-based cryptocurrency exchange by the Malaysian Inland Revenue Board, points towards greater scrutiny of such exchanges.
The Securities Commission Malaysia (SC), as the primary regulator of the capital markets sector in Malaysia, continuously monitors developments and works in parallel with the International Organization of Securities Commissions to develop an appropriate regulatory response to initial coin offerings (ICOs). As the SC formulates its position, it has issued a number of cautionary statements to the public about the risks involved with ICOs. These include warnings that such schemes may not be regulated, may involve activities that are subject to laws under the SC’s and BM’s purview and that carrying on such activities without proper authorisation is an offence.
The SC recently sent a strong signal to the market of its intention to closely monitor developments when it issued a cease and desist order in relation to a proposal by CopyCash Foundation to launch an ICO in Malaysia. The SC said in its statement that there was a “reasonable likelihood that disclosures of the Singapore-registered foundation’s white paper and representations to potential investors will contravene relevant requirements under (Malaysian) securities law”.
Even with the cautious approach by the Malaysian authorities towards regulating and monitoring cryptocurrencies and ICOs, the actions of the BNM and the SC indicate that the regulatory landscape appears to be slowly taking shape in Malaysia.