Malaysia: Cryptocurrency Cannot Be Used as Legal Tender
A few weeks back, Deputy Communications and Multimedia Minister of Malaysia, Zahidi Zainul Abidin, shared that it's timely to legalise cryptocurrencies and consider them as legal tender. Deputy Finance Minister I, Mohd Shahar Madulah, refuted this quickly and reaffirmed that Malaysia has no such plans.
In his response in the week of the March 21 sitting of the Malaysian Parliament, Mohd Shahar reiterated that the government has no intention of recognising cryptocurrencies as legal tender. He added: “Cryptocurrencies, like Bitcoin, are not suitable for use as a payment instrument due to (its) various limitations. (This) include price swings and exposure to cyber threats.”
The volatile nature of cryptocurrencies and their randomised price swings were huge minus-points and deal-breakers for early adopters, such as Valve and Reddit. Other brands that accepted cryptocurrencies previously, like Tesla and Greenpeace, now no longer offer this option due to claims that the crypto-mining needed to produce them is causing environmental damage. Google opted out as well due to regulatory crackdowns.
“We had problems when we started accepting cryptocurrencies as a payment option. 50 per cent of those transactions were fraudulent, which is a mind-boggling number. These were customers we didn’t want to have”, said Gabe Newell, President of Valve, during a recent interview with PC Gamer. He was addressing why Steam removed Bitcoin as a payment option in December 2017.
Notably, some Big Tech players are accepting cryptocurrencies, like Microsoft and Amazon. They are exploring cryptocurrency options to deter software piracy and streamlining payment capabilities.
As these ecosystem players weigh their options, these ongoing movements are seen as encouraging for various finance ministries in Southeast Asia. In the case of Malaysia, the growing technology and payment landscape have warranted a closer study. “Bank Negara Malaysia (Central Bank) will actively assess the potential of banks’ digital currency central or the central bank’s digital currency,” he added.
The Monetary Authority of Singapore (MAS) shared a similar stance and even reinforced it after issuing guidelines that limited cryptocurrency trading service providers from promoting their services to the public. The regulatory move rolled out in January 2022.
“(While) MAS strongly encourages the development of blockchain tech and innovative application for crypto-tokens in value-adding use cases, the trading of cryptocurrencies is (high risk) and not suitable for the general public. Service providers should not portray trading of digital payment tokens (DPT) in a manner that trivialises the risks of trading in DPTs, nor engage in marketing activities that target the general public,” said Low Siew Yee, Assistant Managing Director (Policy, Payments and Financial Crime), MAS.
Even with this notice and unlike Malaysia, Singapore is optimistically cautious about how it wants to approach legalising cryptocurrency as a legal tender. In fact, MAS is currently developing a plan to position the city-state as a global crypto hub and part of the grand scheme includes this “strong regulation and risk awareness” approach.
There have been calls for cryptocurrencies to be legislated from the Malaysian Cabinet.
However, Deputy Finance Minister I confirmed that there are no plans to legalise cryptocurrency as legal tender.
Even so, the option is still on the table as the Central Bank is evaluating all possible considerations.