Cryptocurrency exchanges and blockchain-based companies in Malaysia face some testing periods as a result of regulatory changes in the country. As of Tuesday, January 15, new cryptocurrency regulations have entered into force in Malaysia.
According to reports, the new regulation has classified as cryptocurrencies, tokens and cryptographic assets as securities, which means that they are now under the jurisdiction of the Malaysian Securities Commission.
In accordance with the change, any exchange of unauthorized cryptocurrency or initial money supply (ICO) could be condemned to a 10-year prison term and fines amounting to $ 2.4 million.
While the change may seem hard at face value, penalties for those who do not adhere to the regulations are just the worst case scenario.
According to various sources, the Malaysian government has expressed positive feelings about cryptocurrencies and blockchain technology, even if they have taken a hard line in classifying all cryptocurrencies as titles.
The positive outlook for Malaysia, despite the general treatment
The Malaysian magazine The Star has noted the positive attitude towards the sector, as the Minister of Finance Lim Guan Eng has delivered the application of the new regulations. According to Eng, the Malaysian government sees the potential of cryptocurrencies and blockchain technology to improve a number of sectors of its economy:
"The Ministry of Finance considers digital assets and underlying blockchain technologies as potentially capable of producing innovation in both the old and new industries.In particular, we believe digital resources can play an alternative fund-raising role for entrepreneurs and new companies and an alternative asset class for investors ".
This change of sentiment quickly arrived, considering that a Malaysian government minister had stated that the government was still undecided in its position on cryptocurrencies last week.
Federal Minister of Territories Khalid Abdul Samad released this statement on January 12, according to New Strait Times:
"People have asked me if these currencies (cryptocurrency and digital currency) are legal or illegal." At the moment, the answer is neither legal nor illegal because the situation is not yet clear. "
Nevertheless, the final result complied with the timetable set by the Malaysian government in 2018. In December, the financial regulator and the central bank had made a final decision on regulation for the first quarter of 2019.
Effendy Zulkifly, who founded Crypto Valley in Malaysia, told Cointelegraph that there was already a high level of governmental awareness in the country, with the Central Bank of Malaysia creating a fintech sandbox and creating a & # 39; unit of cryptocurrency.
Zulkifly believes that the move is positive for companies operating in the cryptocurrency space in Malaysia, as it eliminates any uncertainty about the legality of their operations:
"It's a good thing for the cryptocurrency market, because we can [sic] a clear direction and are now recognized by the government. There is no need to be scared and there is no need to hide anymore. We can only follow the requirements of the government and make an ICO without fear anymore. For example, the Swiss government is a model that has recognized ICOs in its country. Their economy has strengthened because the value of ICOs has been considered as foreign direct investment ".
While the Malaysian government has taken into consideration the direction to be taken with cryptocurrencies, there has been much controversy over a local cryptocurrency project linked to a political party.
As reported previously by Cointelegraph, the Harapan currency was born in 2017 and since then has been touted as a cryptocurrency used to finance a coalition of opposition political parties that led to the country's elections in 2018.
The Barisan Nasional had control of the country since its independence in 1957, but eventually took power in 2018, when the Pakatan Harapan coalition took the majority of seats in the lower parliament.
Overcoming the long permanence of power has been used as an important point of struggle by the opposing parties, and the Harapan Currency has been directly linked to the financing of these opposition parties.
There has been some controversy regarding this particular aspect of the project. The identities of the people working on the project are obscure and more than half of the funds raised have been allocated to the system administrators and to one of the political parties within the Pakatan coalition.
The Harapan currency was promoted by Khalid Samad, the Malaysian minister of the Federal Territories mentioned above. Overall, the project seemed to have been kept away from Malaysian financial authorities and civil society groups.
A general approach
The Malaysian government and the financial regulator have made a clear decision to define cryptocurrencies as titles. The decision could have some interesting ramifications, but it is a decision that gives clarity to companies operating in the country.
It is, however, a very different approach to a country like the United States, which took a long time to consider how cryptocurrencies and virtual resources should adjust.
The rules governing the titles have been applied to cryptocurrencies around the world in order to provide a sort of guideline to a technology and a medium of exchange that is still in its infancy.
That said, the United States is trying to move in a different direction than that taken from Malaysia. In December 2018, two members of the United States Congress presented a bill that hopes to exclude digital assets from the definition of securities.
The bill wants the Securities and Exchange Commission (SEC) to adjust taxes on virtual currencies, create a tax exemption for the exchange of several cryptocurrency tokens, as well as a change in the taxation of capital gains realized on the sale and exchange of cryptocurrencies. The proposal essentially wants cryptocurrencies to be considered for what they are and fairly regulated for their use cases.
A first example was the consideration of Ethereum as a security, due to the nature of its sale of tokens in 2014. The American regulators looked long and hard at the situation before the final decision was taken not to consider Ethereum as a security in the June 2018.
However, the simple truth is that Malaysia's take effectively throws a blanket on all cryptocurrencies, ICOs and their pawns. For now, blockchain exchanges and companies will have to play according to the rules or suffer the consequences expected by Malaysian regulatory authorities this week.
The ideal situation
While a general approach seems to be the path that the Malaysian regulators have taken, it may not be the best way to deal with the situation.
Cointelegraph contacted dr. Mattia Rattaggi, president of Crypto Valley Association policy and regulations, who provided a holistic view of global regulatory trends towards cryptocurrencies:
"As we know, the definition of securities varies from country / region to country / region I am not familiar with the securities law in Malaysia, but the same principle should apply."
As Rattaggi suggests, there does not seem to be any clarity on the need to establish clear distinctions between the different types of securities and on how to classify cryptocurrencies and cryptographic activities.
"They seem to consider that all cryptographers are titles, but I do not know if they draw distinctions between payment tokens, utilities, and securities, so in my opinion, only those crypts that match titles under the prevailing financial law in the country should be considered and regulated as securities ".
Nevertheless, regulation continues to be an important point of discussion on cryptocurrencies. Some believe that this is an obstacle, but Rattaggi believes it is pertinent to guarantee the growth and development of the sector:
"I believe that the encrypted economy is still at a stage where it needs more regulation rather than less." More regulation is needed to increase confidence, standardize more and, above all, to reach the level of maturity of interest. for institutional money and investors ".