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Cryptocurrency Regulation and Compliance in Malaysia

Malaysia’s regulatory environment for cryptocurrencies has become increasingly clear in recent years. The country’s Securities Commission (SC) has been at the forefront of shaping the framework, with a renewed focus on digital assets since 2020.

Digital Currencies as Securities

The SC considers most digital assets in Malaysia to be securities and subject to the country’s securities laws, enforced by the Capital Markets and Services Order 2019. This means that companies seeking to raise funds through token offerings must comply with strict guidelines, including:

  • Due diligence on the issuer
  • Anti-money laundering (AML) policies
  • Anti-terrorism funding policies

Guidelines for Issuers

The SC’s revised guidelines on digital assets, which came into effect in October 2020, require issuers to meet specific conditions. These include:

Eligibility Requirements

  • Being a Malaysian corporation with its main business operations in Malaysia
  • Only raising funds through initial exchange offerings (IEOs)

Financial Requirements

  • Maintaining a minimum of RM500,000 in paid-up capital and shareholder funds at all times

Approval Process

  • Applying for and obtaining approval from the SC before conducting an IEO

Reporting Requirements

Once approved, issuers must comply with reporting requirements and provide the SC with confirmation that drawdowns have been utilized by the issuer in accordance with their whitepaper.

Unauthorized Companies

Malaysia’s SC maintains a list of companies unauthorized to operate in the country. Two notable exchanges on this list are Binance and eToro.

Tax Framework

Malaysia does not have a tax framework in place for digital businesses, nor is there any capital gains tax for the sale of investments or capital assets. However, companies earning income from frequently trading digital assets may be liable for income tax, and digital asset exchanges are subject to corporate income tax.

Cryptocurrency Mining

As with most jurisdictions, Malaysia’s regulatory environment for cryptocurrency mining remains unclear. However, the Financial Crimes Enforcement Network (FinCEN) considers crypto miners to be money transmitters, subject to laws governing that activity.

Conclusion

Malaysia’s regulatory environment for cryptocurrencies is becoming increasingly clear, with a focus on digital assets and securities law compliance. Issuers seeking to raise funds through token offerings must comply with strict guidelines, while companies operating in the space must adhere to reporting requirements and tax obligations.