Malaysia’s Cryptocurrency Regulations in 2024
Malaysia, a diverse country with a multi-ethnic and multi-religious population, is home to various minority groups from around the world. With a robust economy boasting an annual GDP growth rate of approximately 6.5%, Malaysia stands as a leading economic force in Asia.
However, when it comes to cryptocurrency, Malaysia has chosen not to embrace it as a legal tender due to several limitations and concerns. The Deputy Finance Minister made this clear in a parliamentary statement, citing the volatile nature of Bitcoin and its susceptibility to cyber-attacks as the primary reasons for its unsuitability as a legal tender. The minister further explained that cryptocurrencies like Bitcoin have various limitations that make them unsuitable for use as a form of payment.
Despite this stance, there are indications that Malaysia may soon legalize cryptocurrencies and non-fungible tokens (NFTs) to encourage youth participation in the crypto industry. The country’s communications ministry has proposed the legalization of NFTs, positioning Malaysia to join the ranks of countries that have regulated crypto NFTs. Such a move would not only expand the support for young people interested in the crypto industry but also foster innovation and creativity in the financial sector.
The Malaysian Central Bank has introduced new rules for cryptocurrency exchanges to combat money laundering and the financing of terrorism. These regulations apply to activities such as exchanging digital currency for fiat money, fiat money for digital currency, and even digital currency exchanges conducted outside the country. While cryptocurrencies are not considered legal tender in Malaysia, they are not illegal either. The government has made it clear that cryptocurrencies will not be banned but regulated, allowing for a more transparent and secure crypto business environment.
To ensure compliance with the regulatory framework, Malaysia’s Securities Commission (SC) has established strict guidelines for digital currencies, tokens, and crypto-assets, categorizing them as securities under its authority. Exchanges are required to obtain a license from the regulator, which is granted only if they meet the regulatory requirements. These requirements include submitting investment documentation, recording and maintaining transaction details, complying with anti-money laundering and counter-terrorism financing rules, and implementing customer data collection plans. Failure to comply with these requirements will result in the denial of a license or the closure of existing exchanges.
In terms of taxation, Malaysia does not consider cryptocurrency as a capital asset and does not accept it as legal tender. Consequently, cryptocurrency transactions are currently tax-free in Malaysia. However, active cryptocurrency traders may be subject to income tax under the Income Tax Act 1967. The country’s tax system exempts crypto transactions from taxation if they are not regular or repetitive income. However, day trading crypto in Malaysia is subject to taxes. Additionally, businesses that generate profits from crypto, whether in fiat currency or cryptocurrency form, are liable to income tax.
Cryptocurrency mining is still considered legal in Malaysia, although there is no clarity on the legalization of virtual currency in the country. Illegal crypto mining has seen a significant increase, leading to confiscations of mining equipment worth millions of dollars. To engage in legal crypto mining activities, interested companies and individuals must submit applications to TNB, the national electricity board.
Malaysia has witnessed various significant events and announcements related to cryptocurrencies and blockchain technology. The country’s security commission reported a substantial volume of digital assets and cryptocurrency trading, highlighting the growing interest in crypto and blockchain technology. Additionally, the government has issued licenses to cryptocurrency platforms, explored the use of blockchain in finance, and published guidelines on digital assets and token sales.
In conclusion, while Malaysia has not embraced cryptocurrency as a legal tender, the government has taken a warm approach to its presence and regulation in the country. By implementing necessary regulations and guidelines, Malaysia aims to create a transparent and secure environment for crypto businesses. With further developments and clearer taxation policies, the future of cryptocurrencies in Malaysia looks promising.