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Securities Commission, Central Bank of Malaysia Declare Regulatory Intentions for Crypto

Securities Commission, Central Bank of Malaysia Declare Regulatory Intentions for Crypto

The securities commission and central bank of Malaysia have released a joint press release offering a brief outline of their intentions to regulate digital assets and initial coin offerings (ICOs).

The announcement, co-authored by the Securities Commission Malaysia (SC) and the central bank of Malaysia, Bank Negara Malaysia (BNM), aimed to provide some clarification on the regulations being put in place. The news comes shortly after the Finance Minister of Malaysia, Lim Guan Eng, had told local press that the digital asset regulatory framework would be delivered in the first quarter of 2019.

In brief

Currently, the regulations to “bring digital assets within the remit of the securities laws to promote fair and orderly trading” are to be applied to digital assets issued through ICOs as well as the trading of cryptocurrencies on domestic exchanges, to “ensure investor protection”. It extends this by adding that ICO issuers and exchanges will be subject to the commission’s ‘Guidelines on Prevention of Money Laundering and Terrorism Financing’.

Accordingly, both ICO operators and crypto exchanges that handle digital assets with “a payment function” will be required to adhere to BNM laws and regulations pertaining to payments and currency matters. Previously, Lim had spoken open-mindedly about cryptocurrencies, claiming that he did not want to hinder cryptocurrencies, though reminded that they are subject to existing laws.

The press release concludes with a disclaimer from the BNM stating that “digital assets are not legal tender in Malaysia”, encouraging consumers to perform due diligence prior to engaging with cryptocurrencies. Finally, it loosely describes how these frameworks are to be implemented, writing, “…the SC and BNM will enter into coordination arrangements to ensure compliance with laws and regulations under the purview of both regulators”.

Regional competition

Malaysia has been emerging as a key player in the South East Asia blockchain race that is accelerating in pace. In September, the nation displayed its bullish moves and began working to marry its top three industries with blockchain technology, namely Islamic banking, palm oil, and its energy sector.

The region has undoubtedly caught the blockchain buzz. In the Philippines, ICOs and cryptocurrency exchanges are soon to have regulations in place, which comes shortly after two new crypto exchanges were established and additional bullish blockchain news.

In addition, Singapore has been making waves akin to that of nations who, like South Korea, are feverishly adopting blockchain technologies, bolstering the domestic ecosystem through institutional investors and making significant progress in their bid to regulate the sector.

As competition heats up in the region, many other major entities such as the European Union and the G20 are making strides in a similar direction. Blockchain is breaking out into global discourse like never before; the “fad” is here to stay.

 

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IMF Big Guns Uphold Pro-Blockchain Views, Commit Long-Term Research

Key figures at International Monetary Fund (IMF) have recently espoused pro-blockchain views with the IMF Managing Director believing in the public benefits of cryptocurrencies, and the Deputy Counsel discussing blockchain technology as part of ongoing future policy research.

Risk and reward

Earlier on in November, the Official Monetary and Financial Institutions Forum (OMFIF) published a bulletin in which IMF Managing Director Christine Lagarde authored an article titled ‘A Regulatory Approach to Fintech: Guarding Against Emerging Risks Without Stifling Innovation’. Highlighting the challenges facing cryptocurrencies, what opportunities they offer, as well as their downsides, she acknowledges the polarizing camps in which many position themselves with regards to the crypto-industry.

According to Lagarde, there are crypto-evangelicals who see the tech innovation as a “similar breakthrough” to the invention of the telephone, and its initial dismissal by the dominant market forces. She also acknowledges the opposing side who believe cryptocurrencies to be “a fad or a fraud”, and says that the new technology should not be dismissed “so lightly”.

Echoing the balanced statements she had made earlier this year, she continues to argue that in the wake of these new technologies, regulators will be challenged to protect consumers and investors from fraud, tackle tax evasion as well as money laundering and terrorism financing, while maintaining the “integrity and stability on the financial system”. But this must also be done carefully as not to stifle innovations that will benefit the public.

Conclusively, she wrote: “Above all, we must keep an open mind about crypto-assets and fintech, not only because of the risks they pose but also because of their potential to improve our lives. When in doubt, think of Bell and his telephone.”

“Anchored” by Blockchain

At the Singapore Fintech Festival on 12 November, IMF General Counsel Ross Leckow said during a discussion with Ripple CEO Brad Garlinghouse: “The IMF is devoting a lot of attention to fintech and blockchain.”

Giving focus to the demand for absolute regulatory certainty, Leckow described the global blockchain regulatory discussions as “early stage”, adding “a lot more work needs to be done”.

Leckow’s views fall in line with those of his colleague Lagarde; when questioned by Garlinghouse on the IMF’s views of digital assets, Leckow said:

“The IMF takes a balanced view. Each country has to decide for themselves what type of regulatory framework is best. But generally speaking, they should be cognizant of risk but also the potential to make the global system more efficient, more inclusive with this new technology.”

Marshall Islands

These open-minded statements may run somewhat in contrary to an ongoing issue regarding the Marshall Islands and their intentions to launch a national cryptocurrency.

It was reported on 12 September that the IMF had published a 58-page report warning against the plan to adopt a digital currency named Sovereign, citing international banking relations and the potential disruption to foreign aid as areas of concern.

 

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South Korean Government to Review and ‘Soften’ Cryptocurrency Policies to Meet G20 “Unified Regulation” Proposal

The South Korean government is said to be revising its cryptocurrency policies after the Buenos Ares G20 Summit agreed to create a set of “unified regulations” in light of acknowledging that cryptocurrencies are “financial assets”.

In late March, the G20’s Finance Ministers and Central Bank Governors released a communique noting that crypto-assets have “the potential to improve the efficiency and inclusiveness of the financial system and the economy more broadly”. It also points out that crypto-assets are not without risks, noting “consumer and investor protection, market integrity, tax evasion, money laundering and terrorist financing” as significant issues.

Significant Moves in South Korea
Since late 2017, South Korea has been churning out controversial and conflictingly positive headlines, from bans on initial coin offerings (ICOs) to proposing a cashless society and a cryptocurrency for its capital city.

As we enter the second half of 2018, the supposedly skeptical nation has proven itself to be a valuable ally to blockchain innovations and is now moving ahead to have its policies fall in line with those proposed by the G20.

According to The Korea Times, G20 financial policymakers have set July deadline for the proposed “unified regulations” and that it doesn’t recognize cryptocurrencies as a threat to financial markets as they are “too small to jeopardize it”. Which may be due to the total market value of cryptocurrencies being less than 1 percent of global GDP.

“Non-Financial Products”
The local news outlet also identifies that the present “non-financial product or asset” classification of cryptocurrencies in South Korea is at odds with the G20 assessment of digital currencies.

Whilst it may be a tricky issue for the countries regulators due to their current stance, it appears as though this won’t be enough to stifle efforts; The South Korean Financial Supervisory (FSS) said:

“It’s almost certain that cryptocurrencies will be classified as assets and the main issue will be centered on how to regulate them properly under the unified frame that will be agreed upon between G-20 nations. Given the current stance, this isn’t good, but we will step up efforts to improve things,”.

Building Blocks to a Crypto-Future
As mentioned before, South Korea has been piecing together some very significant parts of the blockchain/cryptocurrency regulation puzzle; in early May the new FSS Governor Yoon Suk-heun revealed his positive outlook on cryptocurrencies, stating that “There are a lot of issues that need to be addressed and reviewed. We can figure them out but gradually.”

The countries National Tax Agency has also been working with the finance ministry to collect and study taxation data collected from exchange operators; cryptocurrency trading is not legally recognized, and therefore only operators have to pay income taxes.

Furthermore, the countries central bank The Bank of Korea (BOK) has a task force studying the possibility of a central bank digital currency (CBDC). Additionally, the BOK had confirmed it was considering blockchain and cryptocurrencies as part of the “cashless society” project.

“The BOK’s recommendation regarding cryptocurrencies will be released by the end of June, at the earliest,” a BOK official said on May 14.

Bearing in mind that South Korea is the third largest fiat to crypto trading block in the world, it should come as no surprise that the country is steaming ahead with positive and evolving regulation attitudes.

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New KYC Regulations in EU Validate Crypto Trading

In an effort to prevent financial transgressions, the European Union now requires cryptocurrency exchanges to apply know-your-customer (KYC) policies, similar to that required by traditional banks in a move beneficial to the legitimacy of cryptocurrency trading.

Crypto crime prevention

The anonymity surrounding cryptocurrency trading is viewed by many as an enabler of fraudulent activities, money laundering, and terrorist financing. As reported by Reuters, increasing the transparency required by exchange platforms is valuable in countering any negative perceptions around the usage of cryptocurrencies.

With all investors in the industry now required to provide proof of identity when joining exchange platforms in the EU, this will make it significantly easier for law enforcement to trace any cryptocurrency users involved with illicit activities. It also increases the difficulty for potential hackers to access online wallets or exchanges.

The regulation from EU legislators should not be interpreted as a condemnation of cryptocurrencies; on the contrary, it is a move to legitimize and regulate the market for the benefit of investors, and the economy.

Not all those in the crypto sphere are a fan of KYC barriers though, as it goes against the concept of anonymity, the philosophical foundation behind blockchain technology. With incognito transactions being conducted, however, there always runs the risk of fraudulent activity, despite less than 1% of Bitcoin transactions to exchanges found to be guilty of this.

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