PETALING JAYA: Bank Negara Malaysia (BNM) said yesterday its move to impose reporting obligations on digital currency exchanges is not a move to regulate digital currencies and that investors are going into the market at their own risk.
BNM advised the public to carefully evaluate the risks associated with dealings in digital currencies, including risks arising from high volatility in prices, the lack of deep markets and vulnerabilities to cyber attack which can lead to significant losses.
“Users of digital currencies will also not be covered under established disputed resolution arrangements which exist for regulated financial institutions in the event of any dispute or losses.”
The central bank said it will continue to monitor and assess the risks posed to the financial system by such activities to ensure that the integrity of the financial system is not compromised.
The central bank highlighted that the reporting obligation on the exchanges is the first step towards making digital currency activities more transparent in Malaysia, but it does not in any way connote the authorisation, licensing, endorsement or validation by BNM of any entities involved in the provision of digital currency exchange services.
Last month, BNM governor Tan Sri Muhammad Ibrahim said the central bank will designate persons converting cryptocurrencies into fiat money currencies as reporting institutions under the Anti-Money Laundering Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA) beginning next year, which was seen as the central bank’s move to regulate digital currencies.
However, BNM stressed in a statement today that digital currencies are not legal tender in Malaysia and that digital currency businesses are not covered by prudential and market conduct standards or arrangements that are applicable to financial institutions regulated by the central bank.
“This is consistent with reporting obligations currently invoked under the AMLA on other reporting institutions such as legal or accounting firms and real estate agents which do not fall under the bank’s purview.”
The central bank is to hold a media briefing today on digital currencies.
Meanwhile, BNM yesterday issued for public consultation an exposure draft on the invocation of reporting obligations on digital currency exchange business as reporting institutions under AMLA, which aims to ensure that effective measures are in place against money laundering/terrorism financing risks associated with the use of digital currencies and to increase the transparency of digital currencies 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 provided under the AMLA as well as the potential termination or denial of use of financial services in Malaysia.
BNM is inviting written feedback on the specific requirements set out in the exposure draft on digital currencies, which must be submitted to the central bank by Jan 14, 2018.
In another development, World Bank Group lead financial sector specialist Jose De Luna Martinez said forming a framework to regulate cryptocurrencies could be a challenge for financial sector authorities.
“Our view is that the financial sector authorities have a challenge in terms of putting up a framework that can tell people to make a good choice,” he said at a panel discussion held in conjunction with the launch of the World Bank’s Malaysia Economic Monitor Report in Kuala Lumpur yesterday.
He also noted that the major concern is consumer protection as it is crucial for investors to be well informed on the risk associated with digital currencies, which can be volatile.
Meanwhile, World Bank director for regional partnership Malaysia and Thailand Dr Ulrich Zachau opined that there is a need for cryptocurrencies to be regulated and it could actually be helpful to have more exchanges in the future.
Bitcoin began trading on the Chicago Board Option Exchange on Dec 10. As at 8pm yesterday, bitcoin was trading at US$16,669 (RM68,000).
Source: The Sun Daily