Malaysia to Introduce Crypto Regulations by 2024
Malaysia, a diverse nation with a multi-ethnic and multi-religious population, is known for its strong economy, boasting an impressive annual GDP growth of around 6.5%. However, despite its economic success, the country has no plans to embrace cryptocurrency as a legal tender due to concerns regarding the volatile nature of Bitcoin and the potential for cyber threats, according to the Deputy Finance Minister.
In a recent parliamentary session, the Deputy Finance Minister cited the price volatility of cryptocurrencies like Bitcoin and their vulnerability to cyber-attacks as the main reasons for their unsuitability as legal tender. He further explained that these limitations make cryptocurrencies unsuitable for use as payment.
However, there may be a change on the horizon. The country’s communications ministry has proposed the legalization of non-fungible tokens (NFTs) in an effort to expand the participation of young people in the crypto industry. If approved, Malaysia would join a growing list of countries that have regulated crypto NFTs, providing increased support for young people interested in the crypto space.
In terms of regulations, the Malaysian Central Bank has 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 fiat currency, exchanging fiat currency for digital currency, and exchanging digital currency with other cryptocurrencies, including those conducted outside the country. While cryptocurrencies are not considered legal tender in Malaysia, the government has clarified that they will not be banned but rather regulated.
The Finance Minister of Malaysia, Johari Abdul Ghani, emphasized the importance of not banning cryptocurrencies, as it would stifle creativity and innovation in the financial sector. The government aims to strike a balance between regulation and allowing corporations to take advantage of future business opportunities. The Governor of the Malaysian Central Bank, Muhammad Ibrahim, also stressed the need for transparency in the crypto business, urging promoters of cryptocurrencies like Bitcoin, Ethereum, and Ripple to be more transparent in their methods and operations.
To ensure compliance with regulations, Malaysia’s Securities Commission has implemented stricter regulations for cryptocurrencies, classifying them as securities and placing them under the authority of the commission. Exchanges are required to obtain a license from the regulator, and failure to comply with regulatory requirements will result in the denial of a license or closure for existing exchanges.
In terms of taxation, Malaysia does not consider cryptocurrency as a capital asset, and therefore, it is not subject to taxation. However, active cryptocurrency traders may be subject to taxation under the Income Tax Act 1967. Day trading crypto is considered taxable, while businesses are required to pay income tax on profits generated from crypto, whether in fiat currency or cryptocurrency.
When it comes to cryptocurrency mining, Malaysia has not yet provided clarity on the legalization of virtual currencies. Illegal crypto mining activities have increased significantly, with numerous cases opened and arrests made. However, legal crypto mining is still permitted, and interested companies and individuals must submit applications to the national electricity board.
In conclusion, while Malaysia has taken steps to regulate cryptocurrencies and ensure transparency in the crypto business, there is still a need for clearer taxation policies and more rigid regulations. Despite these challenges, the future of cryptocurrencies in Malaysia looks promising, especially with the growing recognition of digital currencies as a secure alternative to traditional financial systems.