KUALA LUMPUR: Bank Negara has reiterated its stand that bitcoin and its cryptocurrency siblings are not legal payment methods in Malaysia, as the central bank initiates a policy compelling digital currency exchange operators to report their activities.
Under the new policy, digital currency exchangers will be categorised as reporting institutions under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA).
“The invocation of reporting obligations on digital currency exchangers is the first step towards making digital currency activities more transparent in Malaysia,” Bank Negara said in a statement.
The reporting obligation to be imposed on these digital currency exchangers, Bank Negara said, is consistent with the requirement invoked under the AMLA on other sectors such as legal and accounting firms, as well as real estate agents which do not fall under the central bank’s purview.
It also does not connote authorisation, licensing, endorsement or validation by Bank Negara on any entities involved in the digital currency exchange services.
“The public is reminded that digital currencies are not legal tender in Malaysia,” it said, reiterating a stand the central bank first made in 2014.
So far, Japan is the only country in the region to recognise bitcoin as a legal payment method.
Because bitcoin and its siblings are not recognised by Bank Negara, users of these digital currencies will not be covered under established disputed resolution arrangements in the event of any dispute or losses.
“Digital currency businesses are not covered by prudential and market conduct standards, or arrangements that are applicable to financial institutions regulated by Bank Negara,” it said.
No details on the timeline of the policy was given in the statement.
Bank Negara said it is inviting written feedback on the specific requirements set out in the exposure draft by Jan 14, 2018.
The proposed policy sets out the legal obligations, requirements and standards that digital currency exchangers as defined under AMLA must carry out as reporting institutions.
This includes transparency obligations, which are intended to provide relevant information for the public to better understand and evaluate risks associated with the use of digital currencies.
“Failure to declare their details as reporting institutions or comply with the reporting obligations may subject the digital currency exchangers to the enforcement and non-compliance actions as provided under the AMLA, as well as the potential termination or denial of use of financial services in Malaysia,” it said.
As the price of bitcoin skyrocketed to above US$16,000, central banks around the world are increasingly recognising the potential upsides and downsides of digital currencies.
A growing number of central banks, including Bank Negara are advocating regulations to impose control, amid fears of an asset bubble in the making.
“Members of the public are advised to carefully evaluate the risks associated with dealings in digital currencies,” Bank Negara said.
This includes risks arising from high volatility in prices, the lack of deep markets and vulnerabilities to cyber-attack which can lead to significant losses.