Earlier this week, Cryptocoinsnews reported that the Malaysian government and its financial regulators are set to regulate the Malaysian bitcoin industry and legalize the usage of the digital currency within the country.
Bank Negara Malaysia (BNM) governor Muhammad bin Ibrahim, a Malaysian central bank official, stated:
“We hope that by year end, BNM will be able to come out with some guidelines on cryptocurrency, particularly those related to anti-money laundering and terrorist financing. We want to ensure that there are clear guidelines for those who want to participate in this sector.”
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Why Malaysia’s Potential Legalization of BItcoin is a Big Deal
For many years, the Malaysian government and its central bank have imposed strict capital controls and restricted the outflow of the Malaysian ringgit outside of the country. Consequently, expat workers in Malaysia have struggled to send large sums of money or remittances to their families overseas.
In late 2016, the Malaysian government was hit hard with the massive devaluation of the Malaysian ringgit. In a short period of time, the country’s national currency declined by around 2 percent in value against the world’s largest reserve currencies such as the US dollar. As a temporary solution, BNM and commercial banks imposed strict capital controls, prohibiting any offshore trading of the Malaysian ringgit and derivatives.
Several large-scale multi-billion dollar Western commercial banks were threatened by BNM and the country’s financial regulators of repatriation. According to an executive of a major Western bank who requested to anonymity due to the sensitivity of the issue, the Malaysian central bank demanded commercial banks to comply with the capital controls and new regulations. BNM also told the banks that the failure to comply to newly established regulatory frameworks will result in the central bank disallowing commercial banks to move their investments and money outside of Malaysia.
“There’s a massive back and forth going on between banks and Bank Negara Malaysia (BNM) now. This is a type of indirect capital control … I see a flood of people exiting Malaysia,” a banker at a foreign bank in Malaysia which deals in foreign currency transactions told Reuters in an interview.
Since then, for the past 10 months, both commercial banks and remittance service providers have been subjected to strict capital controls and inefficient regulations. Expat workers have been struggling to search for secure and cheap methods of sending money back to their families in their home countries.
The legalization of bitcoin in Malaysia could provide an alternative financial and remittance system to expat workers and foreign investors to move money out of the country efficiently. Already, leading bitcoin remittance service providers and brokerages such as Coins.ph, which recently secured $19 million in funding from leading venture capital firms including Nasper, have expanded their operations to Malaysia.
Through the decentralized network of bitcoin, expat workers will be able to send money back to their families. Most countries in Asia including the Philippines, Thailand, Vietnam, Japan, and South Korea have evolved into established and well regulated bitcoin markets.
Increasing Usage of Bitcoin as a Remittance Method in Southeast Asia
In countries like the Philippines, many workers and expat employees utilize bitcoin platforms to send remittances. WIthin two years of operation, Coins.ph has gained millions of new active users that are using the Coins.ph platform to send money, settle utility bills, purchase goods and bitcoin.
Philippine bitcoin startups were able to grow at an exponential rate due to the Philippine government’s legalization of bitcoin as a remittance network. In February, Bankgko Sentral ng Pilipinas, the cnetral bank of the Philippines, announced:
“The Bangko Sentral does not intend to endorse any VC, such as Bitcoin, as a currency since it is neither issued or guaranteed by a central bank nor backed by any commodity. Rather, the BSP aims to regulate VCs when used for delivery of financial services, particularly, for payments and remittances, which have a material impact on anti-money laundering (AML) and combating the financing of terrorism (CFT), consumer protection and financial stability.”