Bank Negara Malaysia issues policy document for digital currencies

Bank Negara Malaysia (“the Bank”) has today issued the Anti-Money Laundering and Counter Financing of Terrorism Policy for Digital Currencies (Sector 6) which has taken into account feedback received during the public consultation period on the exposure draft released on 14 December 2017. The policy aims to ensure that effective measures are in place against money laundering and terrorist financing risks associated with the use of digital currencies and to increase the transparency of digital currency activities in Malaysia.

What does the policy states ???

The public is reminded that digital currencies are not legal tender in Malaysia. Accordingly, digital currency businesses are not covered by prudential and market conduct standards or arrangements that are applicable to financial institutions regulated by the Bank. Members of the public are advised to carefully evaluate the risks associated with dealings in digital currencies. 

Any persons carrying on activities involving digital currencies should refer to the details within the policy to determine its applicability and comply accordingly. Persons covered under the policy as reporting institutions are expected to comply with the provisions of the Companies Act 2016 including the requirement to be incorporated or registered.

Members of the public may access the policy document as well as a list of common questions and feedback on the Bank's website at http://www.bnm.gov.my/.

Commonly asked questions and feedback from BNM:

Will BNM regulate Initial Coin Offerings (ICO)?• Activities related to ICOs are under the purview of the Securities Commission.

• If the ICO involves activities that fall within the scope of services defined under section 4.1 of the policy document, then that activity is under the ambit of the guideline. 

Can BNM consider allowing Digital Currency Exchangers (DCEs) to use selfies in verifying customer’s identity? How does a DCE view the original document?

• The Bank places no restriction on using electronic means of performing the necessary customer due diligence (CDD) or verification of a customer’s identity. However, such methods must satisfy the requirement under Section 9.3.3 which stipulates the process has to be as effective as that of a face-to-face process.

• Reporting institutions (“RI”) can view identification documents physically or via electronic

means, as long as the RI can reasonably determine its authenticity. 

Will Peer-to-Peer (P2P) transactions be covered under the proposed policy document?• As long as the P2P transactions that are offered as services satisfy the definition under section 4.1, they will be required to adhere to requirements as reporting institutions. 

What is BNM’s view on the imposition of tax on currency trading profit?• This issue is under the purview of the Inland Revenue Board (IRB). But as a matter of principle, businesses should be obligated to pay tax on revenues they generate domestically. 

Can individuals run a digital currency exchange business without registering a company with the Companies Commission of Malaysia?

• The Bank expects any person any persons, whether local or foreign, to be incorporated or registered under the Companies Act 2016 if they are carrying on or intending to carry on the activities listed in Paragraph 4.1 of the policy in Malaysia. 

(Source: Bank Negara Malaysia website)