Malaysia Cryptocurrency regulation comes into effect on January 15, 2019.
According to a notice from the country’s Securities Commission (SC), the Capital Markets and service order will become effective on Jan 15th. The new regulation classifies digital currencies, tokens and crypto-assets as Securities, placing them under the Securities Commission’s authority.
Starting from Tuesday, any person operating unauthorised Initial coin offerings (ICOs) or digital asset exchanges in Malaysia will be reportedly facing a 10-year jail sentence and a 10 million ($2.4 million) ringgit fine. The central bank will work with the Security Commission to issue a legal framework on digital assets by the end of the Q1 2019.
The guidelines will among others, establish criteria for determining fit and properness of issuers and exchange operators, disclosure standards and best practices in price discovery, trading rules and client asset protection.
Entities dealing in digital assets will be required to comply with anti-money laundering and counter-terrorism financing (AML / CFT) rules, as well as “cyber security and business continuity measures,” the agency said.
The Finance minister of Malaysia is confident that digital assets have a role to play as an alternative fundraising avenue for entrepreneurs and new businesses and an alternative asset class for investors.
Interest in Crypto trading rising in Malaysia
Malaysia has a recently industrialised market economy with a relatively fast GDP growth. The country is considered to be attractive for foreign investments as it has a highly diversified and robust economy. Malaysia allows Bitcoin mining and trading with no restrictions. The popular sentiment is also the reason behind this as 51% of Malaysian citizens think Bitcoin is the future of money.
Malaysians have always been keen to adopt new technologies. In 2018 this country has contributed 1.06% to the global Crypto trading volume. This is a huge percentage considering half of the global trade volume is contributed by US, Russia and the UK. Malaysia is at the 13th spot in terms of global crypto volume.
A recent survey conducted by Luno provides a fascinating insight into the development, motivations, investment style, and trading psychology of the Malaysian bitcoin community. The survey illustrated tentative uptake of cryptocurrency adoption. 52.6% of respondents have solely invested in bitcoin, with 47.4% reporting that they have purchased cryptocurrencies other than bitcoin. For the Malaysian cryptocurrency community, much of the attraction to bitcoin may simply be the poor performance of their national currency. Most people are likely simply looking for an alternative store of value to the Malaysian ringgit – which recently has seen 18 years lows when valued against the US dollar.
What can you use cryptocurrency for in Malaysia?
- A rice stall in Kelantan accepts payment via Bitcoin? You read that right, Malaysians can now use cryptocurrency to make purchases.
- A car dealer in Seri Kembangan also accepts Bitcoin and Ethereum as payment.
- There is even a Bitcoin ATM machine in Malaysia. It’s located in Ipoh and allows users to buy or cash out Bitcoin. The ATM is being upgraded to include other cryptocurrencies such as ETH, LTC and Dash.
Crypto Taxation in Malaysia
Last year, a London based cryptocurrency exchange’s bank account in Malaysia was frozen by Inland Revenue Board’s (IRB).The audit was to determine whether the cryptocurrency company has complied with the statutory requirement under income tax act 1967 and to ascertain if the business is involved in money laundering activities. Even though Crypto is not a fully regulated industry, it is subject to Malaysian income tax by virtue of the Section 3, whereby tax shall be charged upon the income of any person accruing in or derived from Malaysia.
Estimated tax revenue of government upon legalising crypto
According to the data from Local Bitcoins $77M were traded in Malaysia in 2018. If this amount remains the same for 2019 we can predict atleast $4.6M in taxes earned by the Malaysian government. In local currency Tax revenue lost from Malaysia due to third-party players is 18,900,020 Malaysian Ringgit. This data has been calculated by assuming VAT (6%) will be levied on the Crypto earnings as there are no clear crypto specific tax rules in Malaysia.