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Malaysia

Retail_Trading_Status

Allowed-Regulated Unknown
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Analysis ID
#423
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Latest
Created
2025-06-26 13:05
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Live

Executive Summary

In Malaysia, individual citizens and residents are legally permitted to buy, sell, and hold cryptocurrencies, subject to regulation primarily by the Securities Commission Malaysia (SC) and Bank Negara Malaysia (BNM). The Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 classifies digital currencies and digital tokens meeting specific criteria as securities, bringing them under the SC's purview. Registered Digital Asset Exchanges (DAX) must implement robust KYC/AML/CFT measures, and while cryptocurrencies are not legal tender, exchanging them for goods and services is permitted with mutual consent. The government is exploring further development of digital finance policies, including those related to cryptocurrency and blockchain technology.

Key Pillars

The primary regulator is the Securities Commission Malaysia (SC), which oversees digital asset service providers, requiring registration for companies operating with assets qualified as securities. Bank Negara Malaysia (BNM) also plays a role, monitoring cryptocurrency use to ensure it does not threaten the financial system's integrity, particularly regarding AML/CFT. Core compliance requirements include robust KYC/AML/CFT measures, such as customer due diligence, transaction monitoring, and reporting of suspicious transactions. Digital Asset Exchanges (DAX) must be registered with the SC and implement the "Travel Rule," requiring the sharing of information for crypto transfers.

Landmark Laws

Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019:
* Date of Enforcement: January 15, 2019.
* Summary: Classified digital currencies and digital tokens meeting specific criteria as securities under Malaysian securities laws, bringing their offering and trading under the SC's purview.
Prescription Securities and Digital Currency and Digital Token Order 2019:
* Date of Amendment: January 9, 2025
* Summary: Revised the definition of digital tokens and classified digital assets as securities.

Considerations

Cryptocurrencies are recognized and regulated as securities but are not considered legal tender in Malaysia. Malaysia does not currently impose a capital gains tax on individuals for profits from cryptocurrency investments held long-term. However, income from active or frequent trading of cryptocurrencies, akin to a business activity ("day traders"), is considered taxable income and subject to personal income tax rates. The Inland Revenue Board of Malaysia (LHDN) has initiated enforcement actions, such as "Ops Token," to address undeclared income from cryptocurrency trading. Investors are consistently reminded by authorities to be aware of the risks associated with cryptocurrency investments, including price volatility and the potential for scams, with the SC maintaining an "Investor Alert List" for unauthorized entities.

Notes

Bank Negara Malaysia (BNM) first addressed cryptocurrencies in 2014, stating they were not legal tender and warning the public about the risks involved. The Malaysian government, including the Prime Minister, has expressed interest in further developing the nation's digital finance landscape, including policies for cryptocurrency and blockchain technology. The Securities Commission Malaysia (SC) is actively working on this, including public consultations on tokenized capital market products and potential new legislation. Significant changes to crypto regulations in Malaysia are expected in 2025.

Detailed Explanation

In Malaysia, individual citizens and residents are legally permitted to buy, sell, and hold cryptocurrencies, subject to a regulatory framework established and overseen primarily by the Securities Commission Malaysia (SC). Bank Negara Malaysia (BNM), the central bank, also plays a role, particularly concerning anti-money laundering/countering the financing of terrorism (AML/CFT) and the overall stability of the financial system. Initially, BNM addressed cryptocurrencies in 2014, stating they were not legal tender and warning the public about the risks involved. A significant step towards regulation occurred on January 15, 2019, with the enforcement of the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 ("Prescription Order 2019"). This order classified digital currencies and digital tokens that meet specific criteria as securities under Malaysian securities laws, bringing the offering and trading of such digital assets under the SC's purview. On January 9, 2025, the Prescription Securities and Digital Currency and Digital Token Order 2019 was amended, revising the definition of digital tokens and classifying digital assets as securities. The SC has since issued several guidelines to govern the digital asset ecosystem, including the Guidelines on Digital Assets and the revised Guidelines on Recognized Markets, which regulate Digital Asset Exchanges (DAX). Only DAX operators registered with the SC are permitted to facilitate the trading of approved digital assets in Malaysia. These platforms are mandated to implement robust KYC/AML/CFT measures, including customer due diligence, transaction monitoring, and reporting of suspicious transactions. The "Travel Rule," requiring the sharing of information for crypto transfers, also applies in Malaysia.

While cryptocurrencies are recognized and regulated as securities, they are not considered legal tender in Malaysia, meaning they are not an official medium of payment recognized by BNM. However, exchanging goods or services for cryptocurrencies is not illegal if both parties consent. The Malaysian government, including the Prime Minister, has expressed interest in further developing the nation's digital finance landscape, including policies for cryptocurrency and blockchain technology. The SC is actively working on this, including public consultations on tokenized capital market products and potential new legislation. Regarding taxation, Malaysia does not currently impose a capital gains tax on individuals for profits from cryptocurrency investments held for the long term. However, income derived from active or frequent trading of cryptocurrencies, akin to a business activity ("day traders"), is considered taxable income and subject to personal income tax rates. The Inland Revenue Board of Malaysia (LHDN) has initiated enforcement actions, such as "Ops Token," to address undeclared income from cryptocurrency trading.

Investors are consistently reminded by authorities to be aware of the risks associated with cryptocurrency investments, including price volatility and the potential for scams. The SC maintains an "Investor Alert List" for entities operating without authorization. In summary, Malaysians can legally trade cryptocurrencies, but only through SC-regulated exchanges for approved digital assets. These activities are subject to KYC/AML regulations and specific tax treatments depending on the nature of the trading. The regulatory landscape continues to evolve as authorities aim to foster innovation while safeguarding investor interests and financial stability. The main regulator for digital asset service providers in Malaysia is the Securities Commission Malaysia (SCM). Any company that wishes to operate in Malaysia and provide services with assets qualified as securities has to register with the SCM. Another regulator is Bank Negara Malaysia (BNM), the country's central bank. While cryptocurrencies are not recognized as legal tender in Malaysia, BNM monitors their use to ensure they do not threaten the financial system's integrity.

Summary Points

Retail Cryptocurrency Trading in Malaysia: Regulatory Status (2025)

1. General Status:

  • Allowed-Regulated: Individual citizens and residents are legally permitted to buy, sell, and hold cryptocurrencies.
  • Not Legal Tender: Cryptocurrencies are not recognized as legal tender or a payment instrument by Bank Negara Malaysia (BNM). Businesses are not obligated to accept them.

2. Key Regulatory Bodies & Roles:

  • Securities Commission Malaysia (SC):
    • Primary regulator for digital asset service providers.
    • Oversees the offering and trading of digital assets classified as securities.
    • Registers Digital Asset Exchanges (DAX).
    • Issues guidelines on Digital Assets, IEOs, and DACs.
  • Bank Negara Malaysia (BNM):
    • Central bank.
    • Monitors cryptocurrency use to ensure it doesn't threaten the financial system's integrity.
    • Focuses on AML/CFT aspects.
  • Inland Revenue Board of Malaysia (LHDN):
    • Enforces tax regulations related to cryptocurrency trading.

3. Important Legislation & Regulations:

  • Capital Markets and Services Act 2007 (CMSA):
    • Section 34 requires crypto exchanges to register as Recognised Market Operators.
  • Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 (Prescription Order 2019):
    • Classifies digital currencies and digital tokens meeting specific criteria as securities.
    • Amended in 2025 to revise the definition of digital tokens.
  • Guidelines on Digital Assets (SC):
    • Covers Initial Exchange Offerings (IEOs) and Digital Asset Custodians (DACs).
  • Revised Guidelines on Recognized Markets (SC):
    • Regulates Digital Asset Exchanges (DAX).

4. Requirements for Compliance:

  • Digital Asset Exchanges (DAX):
    • Must be registered with the SC.
    • Must have an independent trustee to safeguard investor funds.
  • KYC/AML/CFT Measures:
    • DAX platforms are mandated to implement robust KYC/AML/CFT measures.
    • Customer Due Diligence (CDD).
    • Transaction monitoring.
    • Reporting of suspicious transactions.
    • "Travel Rule" compliance (sharing of information for crypto transfers).
    • Appointment of a compliance officer.
    • Staff training.
    • Risk-based approaches.
    • Sanctions and AML screening.
    • Record retention.

5. Notable Restrictions or Limitations:

  • Trading Restrictions: Malaysians can legally trade cryptocurrencies, but only through SC-regulated exchanges for approved digital assets.
  • Non-Legal Tender Status: Cryptocurrencies are not legal tender.
  • Investor Alert List: The SC maintains an "Investor Alert List" for entities operating without authorization.

6. Taxation:

  • Capital Gains Tax: Currently, Malaysia does not impose a capital gains tax on individuals for profits from cryptocurrency investments held for the long term.
  • Income Tax: Income derived from active or frequent trading of cryptocurrencies (akin to a business activity or "day traders") is considered taxable income and subject to personal income tax rates.
  • Enforcement: The Inland Revenue Board of Malaysia (LHDN) has initiated enforcement actions ("Ops Token") to address undeclared income from cryptocurrency trading.

7. Recent Developments & Changes:

  • 2025 Amendments: The Prescription Securities and Digital Currency and Digital Token Order 2019 was amended in 2025, revising the definition of digital tokens and classifying digital assets as securities.
  • Government Interest: The Malaysian government, including the Prime Minister, has expressed interest in further developing the nation's digital finance landscape, including policies for cryptocurrency and blockchain technology.
  • SC Initiatives: The SC is actively working on this, including public consultations on tokenized capital market products and potential new legislation.
  • BNM Exploration: BNM is exploring asset tokenization and digital assets.

Full Analysis Report

Report on the Current Status of Retail Cryptocurrency Trading in Malaysia

Date: 2025-06-26

Topic: Retail_Trading_Status

Description: Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

1. Identified Current Status: Allowed-Regulated

2. Detailed Narrative Explanation:

Individual citizens and residents in Malaysia are legally permitted to buy, sell, and hold cryptocurrencies. However, this activity is subject to a specific regulatory framework established and overseen primarily by the Securities Commission Malaysia (SC). Bank Negara Malaysia (BNM), the central bank, also plays a role, particularly concerning anti-money laundering/countering the financing of terrorism (AML/CFT) and the overall stability of the financial system.

Historically, Malaysia's stance on cryptocurrencies has evolved. Initially, like many countries, there was a period of observation and caution. BNM first addressed cryptocurrencies in 2014, stating they were not legal tender and warning the public about the risks involved. A significant step towards regulation occurred on January 15, 2019, with the enforcement of the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 ("Prescription Order 2019"). This order classified digital currencies and digital tokens that meet specific criteria as securities under Malaysian securities laws. This brought the offering and trading of such digital assets under the SC's purview.

The SC has since issued several guidelines to govern the digital asset ecosystem. These include the Guidelines on Digital Assets, which cover initial exchange offerings (IEOs) and digital asset custodians (DACs), and the revised Guidelines on Recognized Markets, which regulate Digital Asset Exchanges (DAX). Only DAX operators registered with the SC are permitted to facilitate the trading of approved digital assets in Malaysia. As of early 2025, there are a few SC-approved DAX platforms. These platforms are mandated to implement robust KYC/AML/CFT measures. This includes customer due diligence, transaction monitoring, and reporting of suspicious transactions. The "Travel Rule," requiring the sharing of information for crypto transfers, also applies in Malaysia.

While cryptocurrencies are recognized and regulated as securities, it's crucial to note that they are not considered legal tender in Malaysia. This means they are not an official medium of payment recognized by BNM, and businesses are not obligated to accept them. However, this does not make the act of exchanging goods or services for cryptocurrencies illegal if both parties consent.

The Malaysian government, including the Prime Minister, has expressed interest in further developing the nation's digital finance landscape, including policies for cryptocurrency and blockchain technology, to remain competitive and ensure consumer protection. The SC is actively working on this, including public consultations on tokenized capital market products and potential new legislation.

Regarding taxation, Malaysia does not currently impose a capital gains tax on individuals for profits from cryptocurrency investments held for the long term. However, income derived from active or frequent trading of cryptocurrencies, akin to a business activity ("day traders"), is considered taxable income and subject to personal income tax rates. The Inland Revenue Board of Malaysia (LHDN) has initiated enforcement actions, such as "Ops Token," to address undeclared income from cryptocurrency trading.

Investors are consistently reminded by authorities to be aware of the risks associated with cryptocurrency investments, including price volatility and the potential for scams. The SC maintains an "Investor Alert List" for entities operating without authorization.

In summary, Malaysians can legally trade cryptocurrencies, but only through SC-regulated exchanges for approved digital assets. These activities are subject to KYC/AML regulations and specific tax treatments depending on the nature of the trading. The regulatory landscape continues to evolve as authorities aim to foster innovation while safeguarding investor interests and financial stability.

3. Specific, Relevant Text Excerpts:

  • Securities Commission Malaysia (SC) & Bank Negara Malaysia (BNM) on Regulatory Roles: "The main regulator for digital asset service providers in Malaysia is the Securities Commission Malaysia (SCM). Any company that wishes to operate in Malaysia and provide services with assets qualified as securities has to register with the SCM. Another regulator is Bank Negara Malaysia (BNM), the country's central bank. While cryptocurrencies are not recognized as legal tender in Malaysia, BNM monitors their use to ensure they do not threaten the financial system's integrity."
  • Legal Status of Cryptocurrency: "Crypto in Malaysia is legal. However, Malaysia doesn’t recognize digital assets as legal tender or as a payment instrument. According to the Prescription Order 2019 (amended in 2025), they are recognized as securities."
  • Regulation of Exchanges (DAX): "The legal way to buy cryptocurrencies in Malaysia is through a licensed Digital Asset Exchange (DAX). The Securities Commission (SC) requires these platforms by law to have an independent trustee to safeguard investor funds, ensuring a level of protection in case something goes wrong with the platform." "Moving forward, any party that operates a crypto-currency / digital asset exchange in Malaysia must be registered as a Recognised Market Operator under section 34 of the Capital Markets and Services Act 2007."
  • AML/CFT Requirements: "Registered companies must implement procedures to comply with Anti-Money Laundering (AML) regulations, including appointing a compliance officer, staff training, risk-based approaches, Customer Due Diligence checks, transaction monitoring, sanctions and AML screening, record retention, and reporting of suspicious transactions." "The new regulations compel Malaysian virtual currency exchanges to mandate KYC adherence, including the collection of ID documentation."
  • Taxation: "Currently, Malaysia does not impose capital gains tax on cryptocurrencies held by individuals. However, income from businesses related to cryptocurrency trading may be taxable as business income. Individuals actively trading cryptocurrencies or identified as “Day Traders” must pay personal income tax." "As Malaysia does not tax capital gain, only revenue gains arising from the disposal of digital currency is taxable. A person who trade digital currencies actively may be viewed as generating revenue from the activity, thus gains from this digital currencies trading is taxable."
  • Non-Legal Tender Status: "In Malaysia, cryptocurrencies are not considered legal tender, meaning they are not recognized as an official form of payment. However, this does not imply that cryptocurrencies are illegal." "Notwithstanding anything in these Guidelines, digital currencies and digital tokens are not recognised as a legal tender nor as a form of payment instrument that is regulated by Bank Negara Malaysia (BNM)."
  • Evolving Regulatory Landscape: "The Securities Commission Malaysia (SC) has expressed its support for Prime Minister Datuk Seri Anwar Ibrahim's commitment to exploring a digital finance policy embracing cryptocurrency and blockchain technology." "Significant changes to crypto regulations in Malaysia are expected in 2025. On January 9, 2025, the Prescription Securities and Digital Currency and Digital Token Order 2019 was amended, revising the definition of digital tokens and classifying digital assets as securities."

4. Direct, Accessible URL Links to Specific Sources:

Web Sources (28)

Sources discovered via web search grounding

Search queries used (8)
  • Retail cryptocurrency trading status Malaysia 2024 2025
  • Securities Commission Malaysia cryptocurrency regulations for individuals
  • Bank Negara Malaysia cryptocurrency guidelines for retail investors
  • Are individuals in Malaysia allowed to buy and sell cryptocurrencies?
  • KYC/AML requirements for cryptocurrency exchanges in Malaysia
  • Legal framework for crypto trading in Malaysia for residents
  • Recent official statements on cryptocurrency trading Malaysia
  • Taxation of cryptocurrency for individuals in Malaysia
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