Malaysia Fintech Regulatory Update - Jan 2018
New draft regulations for cryptocurrency exchanges
Draft regulations released by Bank Negara Malaysia in December require any person or company, which exchanges cryptocurrency on behalf of someone else, to verify their customers' identities, monitor transactions and report any suspicious activities to Malaysian authorities. Additionally, companies must report usage statistics to the central bank. While the regulations will only apply to exchanges -which are being referred to as "reporting institutions" – the bank is looking to create a framework for cryptocurrencies in general as well. Malaysia does not recognize cryptocurrencies as legal tender.
Reporting obligations on digital currency exchange business under Act
Bank Negara Malaysia issued for public consultation, an exposure draft on the invocation of reporting obligations on digital currency exchange business as reporting institutions under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA). This will reduce money laundering / terrorism financing risks and increase the transparency of digital currencies activities. A digital currency exchanger must declare details to the Bank as a reporting institution. Users of digital currencies will not be covered under established disputed resolution arrangements. The draft states that the bank does not regulate digital currencies as they are not legal tender.
Revenue Board freezes cryptocurrency exchange bank account
The Malaysian Inland Revenue Board (IRB) has frozen London-based cryptocurrency exchange Luno’s bank account
The Malaysian Inland Revenue Board (IRB) has frozen London-based cryptocurrency exchange Luno’s bank account citing tax-related reasons. Luno stressed that all funds stored on the platform, whether fiat or digital, remain safe. Users in other regions can trade on the exchange regardless. Malaysian users can continue using the platform for trading activities that do not involve withdrawals or deposits in the Malaysian Ringgit (MYR). Luno encouraged its Malaysian customers to comply with local tax laws and declare any gains that they may have realized. The company stated that it will protect all customers’ personal information throughout.
BNM concept paper on cryptocurrency soon
At the 40th anniversary dinner of Harvard Business School Alumni Club of Malaysia, Bank Negara Malaysia (BNM) Governor Tan Sri Muhammad Ibrahim said that a concept paper on cryptocurrency will be finalized this February. “We are not going to ban it for now, but we are going to let the market decide the future of cryptocurrency,” he said, adding that BNM did not recognize cryptocurrency as fiat money. Finance Minister II Datuk Seri Johari Abdul Ghani had said earlier that a blanket ban on cryptocurrency trading would curb innovation and creativity in the financial sector, particularly financial technology. As of September 2017, there were over 1,100 digital currencies in existence.
Belfrics receives license for bitcoin exchange in Bahrain sandbox
Malaysia-based Belfrics Global has received a license from the Central Bank of Bahrain (CBB) to operate a cryptocurrency exchange in Bahrain, a first for the Mena region. The technology provider proposes to soon implement their identity management solutions using the Belrium Blockchain. Economic Development Board (EDB) chief executive Khalid Al Rumaihi had told the MIT Innovation Forum in Bahrain last September that the country was open to experimentation with blockchain-based cryptocurrencies like Bitcoin within the sandbox. The digital payment market in the Mena region is worth US$ 50 billion.
Digital currencies a tricky subject in Islamic finance
Egyptian Grand Mufti Shawki Allam on January 1 issued a fatwa against cryptocurrencies after Bitcoin in mid-December soared to almost US$ 20,000 per token but lost one third of its value in just 24 hours, dropping below US$ 14,000, and falling back close to US$ 13,000 at the beginning of January. The Religious Affairs Directorate of Egypt also deemed Bitcoin contrary to Islamic rules. Muslim countries with a similar stance are currently Algeria, Morocco and Bangladesh. However, Malaysia, Indonesia, UAE, Turkey and Saudi Arabia accept cryptocurrencies and are currently working on market regulations, even though some clerics in at least Turkey and Saudi Arabia have voiced their objections.