Malaysia Cryptocurrency Laws Regulation of Digital Currencies: Cryptocurrency, Bitcoins, Blockchain Technology
Cryptocurrency is legal and regulated in Malaysia.[1] Most digital assets in Malaysia are considered securities and subject to Malaysia’s securities laws, enforced by the Malaysian Securities Commission (SC) under the Capital Markets and Services Order 2019.[2] On October 28, 2020 the SC’s revised guidelines on digital assets came into effect.[3] The guidelines apply to all issuers seeking to raise funds through token offerings, all persons intending to operate an IEO platform, and all persons intending to provide services of storing or maintaining custody of digital assets.[4] The revised guidelines allow companies to raise funds via issuing tokens, but requires an approved and registered digital asset exchange to facilitate the IEO, and requires IEO platforms to conduct due diligence on the issuer, requiring compliance with AML and anti-terrorism funding policies.[5] An issuer must be a Malaysian corporation with its main business operations in Malaysia, and only raise funds through IEO.[6] An issuer is required to maintain a minimum of paid-up capital of RM500,000 and shareholder funds maintained at all times in the same amount.[7] To conduct an IEO, an issuer must apply to and be approved by the SC, and submit a white paper along with a declaration of the issuer’s directors and senior management.[8] Once approved, an issuer must comply with reporting requirements and provide the SC with confirmation that drawdowns have been utilized by the issuer in compliance with the issuers whitepaper.[9] Malaysia SC maintains a list of companies unauthorized to operate in its country, and two notable exchanges on the list include Binance and eToro.[10]
The guidelines from Securities Commission Malaysia state that digital currencies and tokens are neither legal tender nor a payment instrument recognized by Malaysia’s central bank (Bank Negara Malaysia).[11] Additionally, Malaysia has not made a determination on the legal status of cryptocurrency in the context of property, but a recent injunction granted by the Malaysian Commercial Court has favored treating cryptocurrencies as property, but more judicial support is needed.[12] Malaysia does not have a tax framework in place for digital businesses, and no capital gains tax for the sale of investments or capital assets exist.[13] However, companies earning income from frequently trading digital assets may be liable for income tax and digital asset exchanges are subject to corporate income tax.[14] A Tax Reform Committee was formed in 2018 by the Ministry of Finance but has yet to make any changes to digital taxation.[15]
P.S. Insights on Cryptocurrency Legal Issues
Most jurisdictions and authorities have yet to enact laws governing cryptocurrencies, meaning that, for most countries, the legality of crypto mining remains unclear.
Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity. In Israel, for instance, crypto mining is treated as a business and is subject to corporate income tax. In India and elsewhere, regulatory uncertainty persists, although Canada and the United States are relatively friendly to crypto mining.
However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining.
Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe with statutory or regulatory provisions governing cryptocurrency. The globe below provides links to country-by-country summaries:
[1] The Economist Intelligent Unit, Malaysia’s Central Bank Issues Cryptocurrency Regulation, EIU.Com (Feb. 5, 2018) http://www.eiu.com/industry/article/1426386726/malaysias-central-bank-issues-cryptocurrency-regulation/2018-02-05.
[2] Dato Surin & Joe Yie Tieo, Blockchain 2020 Malaysia, Chambers and Partners (June 17, 2020), https://practiceguides.chambers.com/practice-guides/blockchain-2020/malaysia/trends-and-developments#:~:; Ana Alexandre, Malaysian Securities Regulator Approves Crypto Trading Platform, Cointelegraph.Com (April 3, 2020), https://cointelegraph.com/news/malaysian-securities-regulator-approves-crypto-trading-platform.
[3] Jack Martin, Malaysian Securities Commission Issues Revised Digital Asset Guidelines, Cointelegraph.Com (Oct. 28, 2020), https://cointelegraph.com/news/malaysian-securities-commission-issues-revised-digital-asset-guidelines.
[4] Securities Commission Malaysia, Guidelines on Digital Assets, 1-68, 2 (Oct. 28, 2020), https://www.sc.com.my/api/documentms/download.ashx?id=aeb10f62-944b-4d83-8aa0-4ed492dc1109.
