Regulations on Cryptocurrency in Malaysia to Be Implemented by 2024
Malaysia, a diverse nation with a multi-ethnic and multi-religious population, is home to both Malaysians and various minority groups from around the world. The country boasts the strongest economy in Asia, with an annual GDP growth rate of around 6.5%.
However, despite its economic success, Malaysia has no plans to recognize cryptocurrency as legal tender within its borders. The Deputy Finance Minister recently stated in parliament that the country has concerns about the volatility of Bitcoin and other cryptocurrencies, as well as the potential for cyber attacks. These limitations 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) in order to encourage youth participation in the crypto industry. The country’s communications ministry has proposed this move, which would bring Malaysia in line with other nations that have regulated crypto NFTs. By legalizing these digital assets, Malaysia aims to foster support for the growing number of young people interested in the crypto industry.
The Malaysian Central Bank has also announced 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, exchanging digital currency for other digital currencies, and even exchanging digital currency with entities outside of Malaysia. While cryptocurrencies are not considered “legal” in Malaysia, they are not banned either. The government has made it clear that it intends to regulate rather than prohibit cryptocurrencies.
The Finance Minister of Malaysia, Johari Abdul Ghani, emphasized the importance of not banning cryptocurrencies, as doing so would stifle creativity and innovation in the financial sector. The government is currently working on regulations to ensure that businesses can take full advantage of future opportunities in the crypto industry. The governor of the Malaysian Central Bank, Muhammad Ibrahim, supports a transparent process for crypto businesses, including promoters of cryptocurrencies like Bitcoin, Ethereum, and Ripple. By promoting transparency, the public can make informed decisions about investing in cryptocurrencies.
Malaysia’s Securities Commission (SC) has implemented stricter regulations on cryptocurrencies, classifying them as securities and placing them under the authority of the commission. Exchanges must obtain a license from the regulator in order to operate in the country, and they must comply with various rules, including submitting investment documentation, recording transactions, and adhering to anti-money laundering and counter-terrorism financing rules. Failure to comply with these requirements will result in the denial of a license or the closure of existing exchanges. Local exchanges have been given nine months to register with the SC and meet the necessary license requirements.
As for taxation, Malaysia does not consider cryptocurrencies as capital assets, and the government does not recognize them as legal tender. Therefore, cryptocurrencies are currently tax-free in the country. However, active cryptocurrency traders may be subject to taxation under the Income Tax Act. Day trading cryptocurrencies in Malaysia is taxable, but businesses that generate profits from cryptocurrencies, whether in fiat currency or crypto, are subject to income tax.
Regarding cryptocurrency mining, it is not yet clear whether it is legal in Malaysia. While the authorities have not provided clarity on the legalization of virtual currency, illegal crypto mining has been on the rise in recent years. The Chief of Malaysia noted a significant increase in investigation papers and arrests related to illegal crypto mining. However, interested companies and individuals can still apply for permission from the national electricity board to mine cryptocurrencies.
In conclusion, Malaysia has a positive stance towards cryptocurrencies and their business potential. While regulations have been put in place, there is still some uncertainty surrounding taxation. The future of cryptocurrencies in Malaysia looks promising, especially when more definitive regulations and laws are established.