Regulators have advised of digital currency or “cryptocurrency’s” inherent risks and the general public is also known to be generally skeptical about it.
Cryptocurrency is not recognised as a legal tender in Malaysia and the Central Bank of Malaysia (“BNM”) does not regulate the operations of bitcoin.
Due to growing concerns on the potential risks associated with cryptocurrency, BNM amended the First Schedule of the Anti-Money Laundering and Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (“AMLATFA”) to include any person who provides any or any combination of the services such as exchanging digital currency for money; exchanging money for digital currency; or exchanging one digital currency for another digital currency, whether in the course of carrying on digital currency exchange business or otherwise, as reporting institutions (“Reporting Institutions”) under the AMLATFA. The amendment came into force on 2 January 2018. By virtue of this amendment, digital currency exchange businesses are now Reporting Institutions and are subject to reporting obligations set out in the AMLATFA. Other than the reporting obligations under the AMLATFA, the Reporting Institutions are also subject to Anti-Money Laundering and Counter Financing of Terrorism (“AML/CFT”) policies issued by BNM. BNM had on 27 February 2018, issued the Anti-Money Laundering and Counter Financing of Terrorism (“AML/CFT”) Policy for Digital Currencies (Sector 6) (“Sector 6 AML/CFT Policy”). The Sector 6 AML/CFT policy aims to ensure that effective measures are in place against money laundering and terrorism financing risks associated with the use of cryptocurrencies and to increase the transparency of cryptocurrency activities in Malaysia.
The Sector 6 AML/CFT Policy applies to the Reporting Institutions . For the avoidance of doubt, the Sector 6 AML/CFT Policy will apply to a Reporting Institution regardless of the fact that the Reporting Institution does not have a physical presence in Malaysia.
The Malaysian market is technically non-existent. In view that cryptocurrency is decentralised and relatively border-friendly, the non-existence of a Malaysian market, is irrelevant.
The Sector 6 AML/CFT Policy defines “digital currency” as a digital representation of value that: (i) functions as a medium of exchange; and (ii) is interchangeable with any money (including through the crediting or debiting of an account) but excluding “electronic money” as defined under the Financial Services Act 2013 and the Islamic Financial Services Act 2013, issued by an approved issuer of electronic money under those Acts .
Despite the issuance of the Sector 6 AML/CFT Policy, at this juncture, BNM has no plan to license or regulate digital currency / cryptocurrency activities, including exchangers. BNM has however stated that they will continue to monitor developments and encourage increased transparency in cryptocurrency activities to prevent their abuse and allow users to better assess their risk-reward appetite . Due to the absence of regulations governing cryptocurrency activities, the consumers of cryptocurrency in Malaysia have been advised by the regulators to exercise due caution before participating in any such activities.
Adlin Abdul Majid
Kuala Lumpur, Malaysia
Andrew Ean Vooi Chiew
Kuala Lumpur, Malaysia