Malaysia’s Cryptocurrency Regulations Set for Implementation in 2024.
Malaysia, a diverse country with a multi-ethnic and multi-religious population, has emerged as a leading economy in Asia, with an impressive annual GDP growth rate of approximately 6.5%. However, when it comes to cryptocurrency, the country has no plans to accept it as legal tender due to concerns over price volatility, cyber threats, and the limitations of Bitcoin and other cryptocurrencies.
The Deputy Finance Minister of Malaysia made this announcement in parliament, highlighting the unsuitability of cryptocurrencies like Bitcoin for use as payment. The minister cited the unpredictable price swings and susceptibility to cyber-attacks as major reasons behind the decision.
However, there is a glimmer of hope for cryptocurrency enthusiasts in Malaysia. The country’s communications ministry has proposed legalizing non-fungible tokens (NFTs) as a means to expand youth participation in the crypto industry. If approved, Malaysia would join the growing list of countries that have regulated cryptocurrencies and NFTs, potentially attracting more young people to the crypto space.
The Malaysian Central Bank has also introduced new rules for cryptocurrency exchanges to combat money laundering and the financing of terrorism. These rules apply to activities such as exchanging digital currency for money and vice versa, including exchanges with entities outside the country.
While cryptocurrencies are not considered legal tender in Malaysia, the government has clarified that they will not be banned but regulated. The Finance Minister emphasized the importance of fostering creativity and innovation in the financial sector and expressed the government’s intention to form regulations that will facilitate future business opportunities.
To ensure compliance with regulations, Malaysia’s Securities Commission has implemented stricter rules for cryptocurrencies, classifying them as securities and placing them under the commission’s authority. Exchanges are required to obtain a license and meet various regulatory criteria, such as maintaining detailed records of transactions and participants, complying with anti-money laundering and counter-terrorism financing rules, and implementing measures to protect customer funds.
Regarding taxation, Malaysia does not consider cryptocurrency as a capital asset, and crypto transactions are not subject to tax. However, active cryptocurrency traders may be subject to income tax under the Income Tax Act 1967. Day trading crypto is not considered tax-free, but businesses generating profits from crypto are subject to income tax on both fiat currency and cryptocurrencies.
As for cryptocurrency mining, Malaysia has not yet legalized virtual currency, and authorities have not provided clear guidelines on the matter. Illegal crypto mining has been on the rise, resulting in significant equipment seizures and numerous arrests. However, interested companies and individuals can apply for permission from the national electricity board to engage in legal crypto mining activities.
Despite the challenges and uncertainties surrounding cryptocurrencies in Malaysia, there have been notable developments in the crypto space. The country has seen a significant increase in digital asset trading, with over MYR16 billion traded between August 2020 and September 2021. Additionally, there have been advancements in blockchain technology, including the implementation of a letter of credit on the blockchain by major bank HSBC.
In conclusion, while Malaysia has taken a cautious approach to cryptocurrencies, the government has shown a willingness to regulate and embrace the industry. With the implementation of clear regulations and laws, the future of cryptocurrencies in Malaysia looks promising. As the world continues to recognize the value and potential of digital currencies, Malaysia is poised to be a part of this evolving financial landscape.