On 14th Dec 2017, Bank Negara Malaysia (“BNM”) has issued for public consultation an exposure draft on the invocation of reporting obligations on cryptocurrency exchange business as “reporting institutions” under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001. The draft can be found here (http://www.bnm.gov.my/index.php?ch=57&pg=538&ac=661&bb=file.)
The New Obligations as Reporting Institutions
The draft rules state:
“Members of the public are advised to undertake the necessary due diligence and assessment of the risks involved in dealing in digital currencies or with entities providing services associated with digital currencies.”
In simpler terms, this means cryptocurrency businesses (ie: any person or company which exchanges cryptocurrency on behalf of someone else) must verify their customers’ identities, monitor transactions and report any suspicious activities to Malaysian authorities.
Additionally, companies must report usage statistics to the central bank. This is to control money laundering/terrorism financing risks associated with the use of cryptocurrencies and to increase the transparency of cryptocurrencies activities in Malaysia.
Failure to declare its details as reporting institutions or comply with the reporting obligations may subject the digital currency exchangers to the enforcement and non-compliance actions as well as the potential termination or denial of use of financial services in Malaysia.
You are Responsible for Your Own Risks
You are responsible to evaluate your own risks investing in cryptocurrencies, including risks arising from high volatility in prices, the lack of deep markets and vulnerabilities to cyberattack, which may result in significant losses. The BNM had on many occasions stressed that cryptocurrency is not a legal tender in Malaysia.
Accordingly, the associated businesses are not covered by prudential and market conduct standards or arrangements that are applicable to financial institutions. As such, users of cryptocurrencies will not be covered under established disputed resolution arrangements which exists for regulated financial institutions in the event of any dispute or losses.
BNM is seeking feedback
So, what do you think of the proposed regulations? Please share your thoughts as the BNM is currently inviting written feedback on the draft regulations, and will be receiving feedback until 14th Jan 2018.
