Quick Answer
Yes, cryptocurrency is legal in Malaysia but it is regulated.
- Digital assets are regulated as securities by the Securities Commission.
- However, it is not recognized as legal tender by the central bank.
Legal Status of Crypto in Malaysia
Cryptocurrency occupies a unique, regulated space in Malaysia; it is legal to own and trade but is not considered legal tender. This dual status exists because while the Securities Commission Malaysia (SC) classifies most digital assets as securities under its purview, the central bank, Bank Negara Malaysia, does not recognize them as a valid payment instrument. Consequently, all crypto activities fall under strict regulations, primarily the Capital Markets and Services Order 2019 and the SC's Guidelines on Digital Assets, which dictate compliance for exchanges and issuers.
Current Regulations
In Malaysia, the crypto landscape is primarily governed by the Capital Markets and Services Order 2019, which officially classifies digital currencies and tokens as securities. This places them under the regulatory authority of the Malaysian Securities Commission (SC), which enforces the country's securities laws. The SC has established comprehensive guidelines for digital assets and recognized market operators, setting out the rules for exchanges, initial exchange offerings (IEOs), and custodians. These regulations mandate strict compliance with anti-money laundering policies and other consumer protection measures.
Regulatory Authorities
In Malaysia, the oversight of crypto and crypto trading is primarily handled by two key regulatory bodies.
- Securities Commission Malaysia (SC): As the main regulator, the SC classifies digital assets as securities and enforces compliance under the Capital Markets and Services Order 2019. It is responsible for registering digital asset exchanges, approving token offerings, and issuing comprehensive guidelines to protect investors.
- Bank Negara Malaysia (BNM): As the country's central bank, BNM has declared that digital currencies are not legal tender or recognized payment instruments. It also plays a crucial role in financial integrity by setting anti-money laundering and counter-financing of terrorism (AML/CFT) policies that apply to digital currency activities.
Historical Context
Malaysia's approach to crypto regulation evolved from a hands-off stance to a structured framework. Initially, in 2014, Bank Negara Malaysia simply stated that Bitcoin was not legal tender. The landscape shifted dramatically with the Capital Markets and Services Order 2019, which classified digital assets as securities, placing them under the Securities Commission's (SC) authority. This move formalized the market. The SC subsequently introduced guidelines for exchanges, and a significant update in October 2020 expanded oversight to token offerings and custodians. This progression established a regulated ecosystem focused on investor protection and market integrity.
Compliance Requirements for Businesses in Malaysia
For businesses operating in Malaysia's digital asset sector, compliance is not optional. Both the Securities Commission (SC) and Bank Negara Malaysia (BNM) have established a robust framework to ensure market integrity and consumer protection. Key requirements include:
- Anti-Money Laundering (AML) & Counter-Financing of Terrorism (CFT): Businesses must implement stringent AML/CFT policies. While the SC embeds these requirements in its framework, Bank Negara Malaysia provides comprehensive guidance and resources through its dedicated AML/CFT website.
- Know Your Customer (KYC): As a critical part of AML compliance, robust KYC procedures are mandatory. Digital asset operators are required to verify customer identities according to standards detailed in the SC’s official Guidelines on Digital Assets.
- Adherence to Regulatory Guidelines: All market participants, including exchanges and custodians, must strictly comply with the SC's guidelines. These rules are updated periodically, and businesses are responsible for keeping abreast of all amendments to ensure continuous compliance.
- Registration and Licensing: Operating a digital asset business is a licensed activity. Entities must go through a formal application process and receive approval from the Securities Commission before offering services to the public.
Why this matters for Cross-Border Payments
For businesses conducting transactions between Malaysia and India, Malaysia's stringent regulatory framework introduces critical compliance checkpoints. Any cryptocurrency moving into or out of Malaysia must be processed through a locally licensed digital asset exchange, subjecting the transaction to the country's rigorous AML and KYC protocols. This creates potential pain points such as increased operational costs, settlement delays, and the added complexity of converting digital assets into legal tender, impacting the speed and efficiency often sought with crypto payments.
How Lightspark Enables Compliant Crypto-Native Payments
Lightspark provides an infrastructure layer to streamline global payments. Its core products, Lightspark Connect and Grid Switch, tackle cross-border friction. Connect offers direct access to the Bitcoin Lightning Network, managing complex operations like AI-powered routing and liquidity. Grid Switch bridges traditional finance with crypto by linking domestic real-time payment systems globally, using Bitcoin as a settlement asset. This dual approach enables instant, low-cost transactions, addressing the delays and high costs of conventional cross-border payments.
For regulated entities navigating Malaysia's rules, Lightspark provides tools to aid compliance. The platform offers features like audit-ready reporting, flexible custody options, and integrations for regulatory needs. This doesn't replace an institution's own compliance duties but facilitates them, allowing licensed digital banks and exchanges to leverage Lightspark’s network to expand into new corridors while meeting their obligations.
To learn more about how Lightspark is streamlining cross-border payments, visit Lightspark’s website.
Notice: This article is provided for informational purposes only and does not constitute legal advice.
FAQs
Do I have to pay tax on crypto profits in Malaysia?
Currently, there is no specific capital gains tax on cryptocurrency for individuals who are not engaged in frequent trading. However, if your crypto activities are determined to be a regular trade or business, the profits may be subject to income tax.
Can I use cryptocurrency to buy goods and services in Malaysia?
As cryptocurrency is not considered legal tender, businesses are not required to accept it as payment for goods and services. While a few merchants might accept it voluntarily, it is not a recognized or common medium of exchange for everyday purchases.
Is peer-to-peer (P2P) crypto trading legal in Malaysia?
P2P trading operates in a regulatory gray area and is generally discouraged by authorities due to the high risk of fraud and money laundering. For your protection, it is strongly recommended to use only the digital asset exchanges that are officially registered and approved by the Securities Commission.
Sources
- “Digital Assets.” Securities Commission Malaysia, www.sc.com.my/digital-assets.
- “Digital Assets - Guidelines.” Securities Commission Malaysia, 19 Aug. 2024, www.sc.com.my/regulation/guidelines/digital-assets.
- “Kenyataan mengenai Bitcoin.” Bank Negara Malaysia, 3 Jan. 2014, www.bnm.gov.my/-/statement-on-bitcoin.
- “List of Registered Digital Asset Exchanges - Recognized Markets (ECF, P2P, DAX, PCF and E-SERVICES).” Securities Commission Malaysia, 27 Feb. 2024, www.sc.com.my/regulation/guidelines/recognizedmarkets/list-of-registered-digital-asset-exchanges.
- “Malaysia and Cryptocurrency | Blockchain and Cryptocurrency Regulations.” Freeman Law, 2022, freemanlaw.com/cryptocurrency/malaysia/.
- Policy Document on Digital Currencies. Bank Negara Malaysia, www.bnm.gov.my/documents/20124/761679/Policy+Document+on+Digital+Currencies.pdf.
