Malaysia makes moves to legalize cryptocurrency use, in stark contrast to China and South Korea.
It seems like the Malaysian central government is skipping three stages of grief and going straight from denial to acceptance, while China remains firmly in the anger stage.
Having officially stated that “Bitcoin is not recognized as legal tender in Malaysia” and that “the Central Bank does not regulate the operations of Bitcoin” as far back as 2014, the Malaysian central bank is now staging a U-turn.
Its governor, Muhammad bin Ibrahim, last week mentioned that the institution will be releasing a set of guidelines relating to the use of Bitcoin in Malaysia by the end of the year, in practice rendering the cryptocurrency legal.
The terms under which it will be regulated, however, remain a mystery.
This sudden turn of events comes just two weeks after the Securities Commission Malaysia, the country’s securities regulator, cautioned investors against moves on new initial coin offerings (ICO), “initial token offerings,” “token pre-sales,” or “token crowd-sales,” mechanisms by which new blockchain projects seek funding through the emission of their own currency or tokens, which can be traded and rated against fiat currency like the US dollar, the Japanese yen or, in this case, the Malaysian ringgit.
It is still unclear what other Malaysian regulatory entities will be contributing to the upcoming regulation, but according to Mr. Ibrahim it will likely focus on taking measures against money laundering and terrorist financing networks.
Malaysia joins a growing club of nations that have recently attempted to make sense of the emerging cryptocurrency market, which saw a stratospheric boom this year, standing this week at a market capitalization of USD130 billion, down from USD150 billion in August 2017, but up from a much lower figure of USD17.6 billion in January.
In Asia, in particular, the rapidly growing number of investors entering the market has prompted reactions from governments and regulators across the continent.
In February, the central bank of the Philippines issued guidelines for the regulation of virtual currencies within the country, grounded again in efforts to tackle terrorism financing and money laundering.
According to the documents issued to the public, the central bank will mandate that any entity acting as an exchange service between virtual and fiat currencies to apply for a certificate of registration and be subject to regular audits. The regulator was quick to state that the bank will not be backing the use of any virtual currency but was clear that it does not intend to limit its use.
This reveals a clear understanding that the volume of remittances that could potentially enter the Philippines via cheaper virtual currency transactions can be of great value for the country’s economy.
In Thailand, the securities and exchange committee (SEC) also released a statement last week offering its views on ICOs, recognizing its potential as a source of funding for new tech start-ups and adding that the characteristics of this way of raising capital could see them legally placed under the banner of regular securities, and therefore bound to the SEC’s regulating authority. The same view is shared by Hong Kong’s Securities and Futures Commission.
South Korea has a more conflicted approach.
Earlier this month, the country’s digital currency task force, which includes the country’s central bank, financial regulators, and digital currency companies, released a statement defending stronger regulations for the market, reinforcing user identification at exchanges and stating that digital currencies are not considered money or financial products.
The group also stated its intention to punish ICOs as illegal means of capital sourcing, falling under the country’s Act on the Regulation of Conducting Fund-Raising Business without Permission.
On the other hand, the government had earlier tried to attract bitcoin-based financial technology companies by issuing permits that would technically allow them to act as foreign currency exchanges. It is likely that these kinds of contradictory policy approaches will be common in the years to come as countries battle to understand, restrict, and profit from the digital financial revolution.
But China is leading the fight at present. After a first step to regulate the market in January, it raised the bar instituting an outright ban on ICOs in August, sending cryptocurrency markets into a downward spiral and putting an end to a rally that saw Bitcoin value surpassing the USD5,000 mark.The government has now moved to forbid transactions on any exchanges in the country and it is uncertain if further action will be taken in the months to come.
