Malaysian Central Bank Working on Regulation for Digital Currencies
Given bitcoin’s massive value surge during the last couple of weeks, more and more financial institutions are considering what the best approach towards digital currencies is. For instance, recent reports indicate that the Bank Negara Malaysia (BNM), which is the country’s central bank, is now working on a regulatory framework for bitcoin and other cryptocurrencies.
According to the BNM government, the regulatory framework is mostly aimed towards reducing the risks associated with money laundering and terrorism financing. This makes sense, since Governor Muhammad Ibrahim made these statements at a counter-terrorism financing summit.
With this in mind, the BNM has decided that starting next year, all entities that are involved with exchanging digital currencies into fiat, will be reported institutions. These means that they will be subject to the Anti-Money Laundering, Proceeds and Unlawful Activities and Anti-Terrorism Financing Acts. So far, it is expected that this will mean stricter scrutiny towards digital currency exchanges. Often enough, policies like these are implemented with the help of stricter KYL/AML policies, which in return, require digital currency exchange customers to provide more personal information.
Additionally, the BNM representative has mentioned that these institutions will also be required to take more measures, in order to make sure that their services aren’t used for money laundering or terrorism financing purposes. According to the governor, “This is to prevent the abuse of the system for criminal and unlawful activities and ensuring the stability and integrity of the financial system.”
At this moment in time, the Bank Negara Malaysia is also working on learning more about central-bank issued digital currencies. However, their centralized nature make them unappealing to digital currency enthusiasts, who are better-off with the well-known coins.
Luckily, there has been no talk on stricter legislative frameworks, such as what China has implemented in the past. For those who do not know, China shut down the activity of most cryptocurrency exchanges operating on its territory, and also made Initial Coin Offerings (ICOs) illegal.
Based on everything that has been outlined so far, many think that central banks should refrain from introducing such policies. After all, only a negligible percentage of cryptocurrency users are involved with money laundering or terrorism financing.