Cryptocurrency has gained popularity in recent years, with many people using it as an alternative form of investment. Cryptocurrency is a digital or virtual currency that uses cryptography for security and is not backed by any government or central bank. In recent years, the use of cryptocurrency has grown significantly, with many people using it as a means of exchange and a store of value.
In Malaysia, the legal status of cryptocurrency is currently unclear. While it is not explicitly illegal, it is also not regulated by the government. Even though the government did show the intention of wanting to have/set up crypto regulation to help in managing the space. This lack of regulation has led to some uncertainty and confusion among those who are interested in using or investing in cryptocurrency. Especially in terms of the tax implications, it remains a source of confusion for many Malaysian investors.
- Initial regulations (2014-2017)
- In 2014, Malaysia’s central bank, Bank Negara Malaysia (BNM), issued a statement on digital currencies, indicating that they are not legal tender in the country.
- In 2017, BNM introduced the Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) policy for digital currencies, which required all digital currency exchanges to register with BNM as reporting institutions.
- Guidelines for ICOs (2018)
- In January 2018, the Securities Commission Malaysia (SC) released a statement on initial coin offerings (ICOs), warning investors of the risks associated with such investments.
- In March 2018, the SC issued a consultation paper on regulations for ICOs, which proposed requiring ICO issuers to submit a whitepaper and obtain regulatory approval before launching their tokens.
- Crypto Exchange Regulations (2019-2020)
- In January 2019, the SC introduced the Guidelines on Recognized Markets, which provided a regulatory framework for digital asset exchanges in Malaysia. The guidelines cover areas such as anti-money laundering, customer due diligence and cyber security.
- In June 2019, the SC announced that it had registered three digital asset exchanges as Recognized Market Operators (RMOs).
- In October 2019, the SC issued the Guidelines on Digital Assets, which provided further guidance on the regulation of digital assets and ICOs in Malaysia.
- In March 2020, the SC announced that it had registered three more digital asset exchanges as RMOs.
- Amendments to the Securities Commission Act (2020)
- In December 2020, the Malaysian government passed amendments to the Securities Commission Act, which extended the SC’s regulatory powers to cover digital assets and digital asset exchanges.
- Proposed Central Bank Digital Currency (CBDC) (2021)
- In June 2021, BNM announced that it was considering issuing a central bank digital currency (CBDC) and was seeking public feedback on the proposal.
Challenges
One of the key challenges in determining the tax liability of crypto transactions is the lack of a specific tax regime for digital currencies in Malaysia. The Inland Revenue Board of Malaysia (IRBM) has stated that the sale or exchange of digital currencies should be treated as a form of property for tax purposes, however, no clear guidance on how to calculate the tax liability on such transactions has been released. This means that any gains or losses from the sale or exchange of digital currencies would be subject to capital gains tax. Some experts have suggested that the IRBM should provide more guidance on how to calculate the tax liability on crypto transactions, and should consider introducing a specific tax regime for digital currencies.
This means that those who are interested in using or investing in cryptocurrency should proceed with caution and be aware of the potential risks. It is important to note that the legal status of cryptocurrency can change, and it is always best to check with the relevant authorities before using or investing in it. In the meantime, those who are interested in cryptocurrency should be cautious and do their own research before making any decisions.
Malaysia has been gradually establishing a regulatory framework for digital assets and digital asset exchanges over the past few years, with the introduction of guidelines and policies aimed at preventing money laundering and protecting investors. The proposed CBDC indicates that the country is also exploring the use of digital currencies as a potential tool for its monetary policy.