Malaysia

**Report: Retail Cryptocurrency Trading Status in Malaysia**

**Date:** April 12, 2025

**Prepared For:** Internal Review
**Prepared By:** Specialized Financial Regulatory Analyst

**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)

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**1. Current Status:**

`Allowed-Regulated`

**2. Detailed Narrative Explanation:**

Retail trading (buying, selling, holding) of cryptocurrencies by individual citizens and residents is legally permitted in Malaysia, but it operates within a defined and actively enforced regulatory framework primarily overseen by the Securities Commission Malaysia (SC).

**Legal Status and Regulatory Authority:**
*   Cryptocurrencies, referred to legally as "digital assets" (encompassing digital currencies and digital tokens), are **not recognized as legal tender** in Malaysia. The Malaysian Ringgit remains the sole legal tender as stipulated by the Central Bank of Malaysia Act and the Currency Act 2020.
*   Despite not being legal tender, digital assets were formally brought under securities law through the **Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019** ("Prescription Order 2019"). This order classifies qualifying digital currencies and tokens as securities, placing them under the regulatory purview of the Securities Commission Malaysia (SC) pursuant to the Capital Markets and Services Act 2007 (CMSA 2007).
*   The **Securities Commission Malaysia (SC)** is the principal regulator for digital asset trading, issuance (via Initial Exchange Offerings - IEOs), and custody in the capital market.
*   **Bank Negara Malaysia (BNM)**, the central bank, monitors the space primarily for financial stability risks and oversees Anti-Money Laundering/Countering Financing of Terrorism (AML/CFT) compliance for entities handling digital currencies, but it does not regulate them as payment instruments or legal tender.

**Regulatory Requirements for Retail Trading:**
*   **Mandatory Use of Registered Exchanges:** Individuals wishing to trade digital assets must do so through platforms registered with the SC as **Recognized Market Operators (RMOs)**, specifically licensed as **Digital Asset Exchanges (DAXs)**. Operating an unlicensed DAX is illegal in Malaysia, and the SC has taken enforcement actions against non-compliant platforms (e.g., Binance in 2021).
*   **Licensed DAXs:** As of early 2025, the SC has registered several DAXs, including Luno Malaysia, SINEGY DAX, Tokenize Technology (M), MX Global, Hata Digital, and Torum Technology. These platforms are required to adhere to strict regulatory standards.
*   **Permitted Assets:** Only digital assets approved by the SC are allowed to be traded on these registered DAXs. The list includes major cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Litecoin (LTC), Cardano (ADA), Solana (SOL), Chainlink (LINK), Uniswap (UNI), and others.
*   **AML/CFT Compliance:** Registered DAXs are designated as reporting institutions under Malaysia's AML/CFT framework. They must implement robust measures, including Know Your Customer (KYC) procedures for onboarding users, transaction monitoring, and adherence to the **FATF Travel Rule**, which requires collecting and transmitting originator and beneficiary information for crypto transfers above certain thresholds. These requirements are outlined in the SC's Guidelines on Prevention of Money Laundering and Terrorism Financing.
*   **Investor Protection:** The SC's regulations for DAXs include requirements for governance, risk management, cybersecurity, safeguarding client assets (including secure storage), operational transparency, and fair trading practices.
*   **Shariah Compliance:** The SC's Shariah Advisory Council (SAC) has resolved that investment and trading in approved digital assets on registered DAXs are permissible from a Shariah perspective, provided certain conditions related to the asset's nature and use of proceeds are met.

**Other Considerations:**
*   **Initial Exchange Offerings (IEOs):** Fundraising through the issuance of new digital tokens is also regulated by the SC and must be conducted via SC-registered IEO platforms.
*   **Taxation:** While Malaysia generally does not have a broad capital gains tax for individuals, income derived from active or frequent cryptocurrency trading that resembles a business activity may be subject to income tax under the Income Tax Act 1967. The Inland Revenue Board of Malaysia (LHDN) has increased enforcement, launching operations like "Ops Token" in 2024 to target tax evasion from crypto trading.
*   **Warnings:** Both the SC and BNM regularly issue advisories warning the public about the high risks associated with digital asset investments, including price volatility, cybersecurity threats, and the lack of legal tender status or traditional consumer protection mechanisms applicable to regulated financial services.
*   **Ongoing Developments:** The Malaysian government, including the Prime Minister, has expressed interest (as recently as January 2025) in developing a more comprehensive digital finance policy potentially encompassing dedicated legislation for cryptocurrency and blockchain, signaling continued evolution of the regulatory landscape. BNM is also actively exploring asset tokenization and Central Bank Digital Currencies (CBDCs), particularly wholesale CBDCs, while maintaining its stance against recognizing private cryptoassets as legal tender. Trading volumes on registered DAXs saw significant growth in 2024.

In summary, retail cryptocurrency trading in Malaysia is allowed but strictly regulated. Individuals must use SC-licensed platforms, undergo KYC, and trade only SC-approved assets. While the government fosters responsible innovation, it maintains a cautious stance, emphasizing risk management, AML/CFT compliance, and investor protection within the capital markets framework.

**3. Supporting Excerpts from Sources:**

*   **On Legality and Regulation by SC:** "In Malaysia, cryptocurrencies are legal and classified as securities under Order 2019, but they are not recognized as legal tender or payment instruments by the country's central bank, Bank Negara Malaysia... The Securities Commission Malaysia (SCM) regulates cryptocurrencies through Order 2019." (Source: Notabene, June 2023)
*   **On Classification as Securities:** "Digital assets are recognised as securities under the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 (“Prescription Order 2019”), for the purposes of securities laws in Malaysia..." (Source: Azmi & Associates via Google Search Snippet)
*   **On Mandatory Use of Registered Exchanges:** "The trading of digital assets in Malaysia would be legally permitted if it is conducted through an SC-approved DAX platform. Pursuant to Sections 7(1) and 34(1) of the CMSA 2007, a DAX operator must be registered as Recognized Market Operators (“RMO”) with the SC before it can lawfully function as a DAX operator in Malaysia." (Source: Azmi & Associates via Google Search Snippet)
*   **On Non-Legal Tender Status:** "Cryptocurrencies are not recognized as legal tender in Malaysia. The Central Bank of Malaysia Act establishes the ringgit as the country's sole legal tender, effectively excluding cryptocurrencies from this status." (Source: Forbes, September 2024) / "While BNM has no intention to recognize crypto assets as legal tender now, BNM will continue to monitor developments in this space..." (Source: Bank Negara Malaysia via TNGlobal/The Star, March 2025)
*   **On Registered Exchanges:** "There are six registered and regulated cryptocurrency exchanges in Malaysia: Luno, SINEGY, Tokenize, MX Global, Hata, and Torum. These platforms provide a secure environment for crypto transactions while adhering to local regulations." (Source: Finder.com, January 2025) / List of RMO-DAX Operators on SC website includes HATA Digital Sdn Bhd, Luno Malaysia Sdn Bhd, MX Global Sdn Bhd, SINEGY DAX Sdn Bhd, Tokenize Technology (M) Sdn Bhd, Torum Technology Sdn Bhd. (Source: Securities Commission Malaysia Website)
*   **On AML/Travel Rule:** "In 2021, the SCM transposed crypto Travel Rule requirements to the Malaysia national framework through an amendment to the Guidelines on Prevention of Money Laundering and Terrorism Financing... The Crypto Travel Rule came into force in Malaysia on April 1, 2022." (Source: Notabene, June 2023) / "Malaysian VASPs must comply with the AML guidelines outlined in the Guidelines SC-GL/AML-2014 (R2-2021)." (Source: Notabene, June 2023)
*   **On Recent Government Interest:** "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... Anwar revealed that he had held discussions with the UAE government, as well as cryptocurrency and blockchain giant Binance to explore the idea of drafting a policy on digital finance." (Source: The Edge Malaysia, January 2025)
*   **On Taxation Enforcement:** "In June 2024, Malaysia's Inland Revenue Board launched a special operation called "Ops Token" to address tax revenue leakage from cryptocurrency trading... The IRB CEO... warned crypto traders to declare their taxes promptly or face compliance actions." (Source: Forbes, September 2024 / Sumsub, referencing Cointelegraph)

**4. Source Links:**

*   **Securities Commission Malaysia (Digital Assets Page):**
    *   `https://www.sc.com.my/regulation/digital-assets` (Primary Source)
*   **Securities Commission Malaysia (List of Registered DAXs - RMOs):**
    *   (Accessible via the main Digital Assets page link above, under "List of Regulated Digital Asset Players") (Primary Source)
*   **Capital Markets Malaysia (Digital Asset Exchange Info):**
    *   `https://www.capitalmarketsmalaysia.com/market-landscape/digital-asset-exchange-dax/` (Semi-Primary Source - Industry Development Arm of SC)
*   **Bank Negara Malaysia (Central Bank - Statements/Reports often reference Crypto):**
    *   `https://www.bnm.gov.my` (Primary Source - Search for specific reports/statements)
*   **Forbes - Legal Status Of Cryptocurrencies In Malaysia (Sept 2024):**
    *   `https://www.forbes.com/advisor/investing/cryptocurrency/legal-status-cryptocurrencies-malaysia/` (Reputable Secondary Source)
*   **Sumsub - Crypto Regulations in Malaysia—2025 Guide:**
    *   `https://sumsub.com/blog/crypto-regulations-in-malaysia/` (Reputable Secondary Source - Compliance Focus)
*   **Finder.com - How to Buy Cryptocurrency in Malaysia (Jan 2025):**
    *   `https://www.finder.com/my/how-to-buy-cryptocurrencies` (Reputable Secondary Source - Consumer Focus)
*   **The Edge Malaysia - SC backs PM's push for digital finance policy (Jan 2025):**
    *   `https://theedgemalaysia.com/node/701031` (Reputable Secondary Source - News)
*   **The Star / TNGlobal - Bank Negara monitoring crypto risks (Mar 2025):**
    *   `https://www.thestar.com.my/business/business-news/2025/03/24/bank-negara-to-explore-asset-tokenisation-while-monitoring-crypto-risks`
    *   `https://tnglobal.asia/2025/03/24/malaysian-central-bank-explores-asset-tokenization-while-monitoring-crypto-risks/` (Reputable Secondary Source - News)
*   **Notabene - Travel Rule Crypto in Malaysia (June 2023):**
    *   `https://notabene.id/crypto-travel-rule-malaysia` (Specialized Secondary Source - Compliance Focus)
*   **Library of Congress - Regulatory Approaches to Cryptoassets: Malaysia (Older, but provides background):**
    *   `https://www.loc.gov/law/help/crypto/malaysia.php` (Reputable Secondary Source)

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**End of Report**