June 18, 2024

Crypto regulations in Malaysia - Guidance for 2024

Around the world, virtual assets and blockchain technology are rapidly developing and becoming an important part of the fintech landscape.

As an important economy in Southeast Asia, Malaysia is also actively exploring and implementing virtual asset regulatory policies suitable for its own development. Although the country does not consider digital assets to be legal fiat, it still defines them as a form of security. At the same time, Malaysia has been struggling to provide a coherent legal framework for virtual assets and their service providers.

This article will provide an overview of the current regulatory framework for virtual assets in Malaysia, exploring its policy objectives and practical implementation.

Virtual Asset Policies in Malaysia

According to the relevant policies of Malaysia, virtual assets are divided into two categories:

Digital currency - a digital representation of value, recorded on a distributed digital ledger, whether crypto or otherwise, that acts as a medium of exchange and can be interchangeable with any currency, including through credits or debits to accounts

Digital token - a digital representation recorded on a distributed digital ledger, encrypted or not

The document also specifies the circumstances under which digital currencies and digital tokens are considered securities.

Companies wishing to do business in Malaysia must determine if they are dealing in digital tokens or digital currencies. Based on this, companies are classified into one of the following categories:

● Recognized Digital Asset Exchange Market Operator (RMO-DAX) - a platform that facilitates the trading of virtual assets

● Digital Asset Custodian (DAC) - provides digital asset custody services. Play an important role in the ecosystem to protect investors' virtual assets

● Initial Exchange Offering (IEO) - an alternative way for financing innovative businesses through digital tokens.

What are the regulations of Malaysia?

The primary regulator for virtual asset service providers in Malaysia is the Securities Commission Malaysia (SCM). Any company wishing to operate in Malaysia and provide securities-eligible asset services must be registered with SCM.

The Securities Commission of Malaysia regulates virtual assets in Malaysia through the Capital Markets and Services (Securities Regulations) (Digital Currencies and Digital Tokens) Act 2019, which enables the Securities Commission of Malaysia to set guidelines on the offering and trading of digital assets.

RMO-DAX companies are subject to the Approved Market Guidelines, while DAC and IEO are subject to the Digital Asset Guidelines.

In addition to the Personal Data Protection Act 2010, companies must comply with the Anti-Money Laundering, Anti-Terrorist Financing and Proceeds of Illicit Activities Act 2001 and the relevant SCM guidelines.

How to comply with anti-money laundering regulations in Malaysia

In Malaysia, registered companies are required to implement and enforce a number of procedures to comply with anti-money laundering regulations. These include:

● Appointment of Compliance officers

● Provide staff training for employees in related fields

● Implement a risk-based approach by considering all relevant risk factors, such as company size and number of new customers

● Conduct customer due diligence, including identifying and validating customers. Depending on the risk level of the client, the company should conduct simplified due diligence (SDD) or Enhanced Due Diligence (EDD).

● Transaction monitoring, including checking the size, trajectory and frequency of transactions

● Sanctions and anti-money laundering screening to check if the client is on the sanctions list or designated as a political public figure (PEP)

● Records must be kept for at least seven years from the date of last completed transaction or account termination

● Report suspicious transactions, which must be submitted immediately

Web3 Events in Malaysia

On June 20-22, Solana largest Founder and Developer Summit will be held in Kuala Lumpur, Malaysia. The Solana Summit brings together the brightest minds in the Web3 space for a powerful gathering. Keynote speeches by visionary founders and in-depth technical discussions by Solana protocol experts.

As one of the main sponsors of the summit, Beosin is proud to be part of it and have already worked closely with RMBex, our KYT customer in Malaysia. This time in Kuala Lumpur, we will discuss the future of the Web3 world with the world's top blockchain technologists, developers and entrepreneurs. We believe that this is not only a great opportunity to showcase the latest technology, but also a platform to share knowledge and experience. Our team of experts will present Beosin's innovations in the areas of smart contract auditing, blockchain security and risk management.

On June 20 at 15:30, Beosin will participate in the summit's "Building Trust in Web3: Safeguarding Users and Builders" panel discussion, sharing a range of measures and strategies to address security risks. The roundtable will focus on security audits, security practices, and protecting user assets.

On June 21 at 11:40, Beosin Security expert will provide Solana developers with a Workshop on Solana Smart Contract Security to help developers understand the core concepts of Solana and analyze past security incidents to expose common vulnerabilities in the development of Solana contracts. Registration Link: https://lu.ma/solana-summit-apac-2024-WS120

Reference: https://sumsub.com/blog/crypto-regulations-in-malaysia-2023-guide/

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