Cryptocurrency under watch
Bank Negara to decide by year-end if alternative currency schemes should be banned
Those investing in cryptocurrency will know by the end of the year if it would be a legal investment scheme in Malaysia.
As other countries have increasingly banned this form of currency, Bank Negara governor Tan Sri Muhammad Ibrahim said that it would make a decision on the matter by the end of the year.
“In less than three months, we should be able to give you more details,” he said when asked if there were any plans to place a ban on cryptocurrencies such as bitcoin, similar to what had been done by China’s government.
Muhammad said that if Bank Negara decided to recognise cryptocurrency, then guidelines would be issued by the end of the year on Malaysia’s approach towards investing in it.
“The guidelines that we will be issuing before the end of the year will address issues in terms of registering the players, collecting data and ensuring that whatever they do will be transparent,” he told reporters on the sidelines of the 9th International Conference on Financial Crime and Terrorism Financing (ICFCT).
It was earlier reported that Bank Negara was planning to unveil guidelines on cryptocurrencies by the end of this year.
Muhammad recently said that this new form of currency had attracted much attention internationally, and that the guidelines would also relate to anti-money laundering and terrorism financing.
A statement by Bank Negara back in January 2014 said that bitcoin is not recognised as legal tender in Malaysia.
Other countries in the region that have placed an official ban on cryptocurrency include China and South Korea.
Only Japan has recognised this form of currency, which was established by a person from that country as an alternative to the current form of money. And because it was the earliest of such assets, bitcoin is the most popular among the cryptocurrencies.
There are hundreds of new cryptocurrency coins that have been launched in the last two years. Investors have purchased the newly launched coins with the hope of them seeing an appreciation in value over the years.
For instance, bitcoin has risen by almost 600% in just a year and is now trading at US$4,262.66.
However, not all countries are allowing the launch of cryptocurrency as a form of investment or even a legal tender.
China’s regulators had at the beginning of last month instituted a ban on digital token fundraisers called initial coin offerings (ICOs). Subsequently, wire reports said that some major China-based bitcoin exchanges such as BTC China announced that they would end trading by end-September 2017.
By the end of September 2017, South Korea also announced a ban on domestic ICOs and margin trading in cryptocurrencies.
Newswires reported United States-based bank JPMorgan Chase & Co’s chief executive officer Jamie Dimon as saying last month that bitcoin was “a fraud” which was based on something that wasn’t real and that it would eventually “be closed”.
Dimon said the bitcoin fad was similar and possibly worse than the tulip bulb bubble mania of the 17th Century, noting that currencies have legal support while cryptocurrencies don’t.
He said JPMorgan traders who traded in bitcoin would be fired because it was against the bank’s rules.
There were, however, some countries such as Japan which have legalised cryptocurrency, with the recognition of a handful of companies as legal cryptocurrency exchange operators.
The registration will require legalised cryptocurrency companies to have strong computer systems and the enabling of checks for the identity of users to prevent money laundering.
On another matter, Bank Negara said that it would publish enforcement action taken against financial institutions and intermediaries for non-compliance with rules and regulations from January 2018.
“Starting from Jan 1, 2018, all breaches of the law and rules and all penalties and compounds that are imposed will be made transparent, and the name of the financial institution with the nature of the offences will be published,” Muhammad said.
“We have given financial institutions ample time to prepare their systems and people for this eventuality. It will be published on our website.
“We will work with all regulators, including the Securities Commission and Bursa Malaysia,” he added.
These actions would be published to further increase the impact of enforcement action as a credible deterrent, the governor said in his speech at ICFCT’s Future Proofing Compliance: Responsibility and ResponseAbility conference.
He said Bank Negara would continue to remain firm in ensuring the orderly conduct of the financial system.
“We expect financial institutions to adhere to strong compliance and corporate governance standards.
“We have not hesitated to impose hefty fines when circumstances warranted such action,” he said.
“Between 2015 and June 2017, a total of RM115.8mil of fines and penalties were imposed on institutions for breaching our regulations and affecting the integrity of the financial system,” he added.