Bank Negara Malaysia has issued a stern warning that digital currencies are not legal tender in the country.
The central bank said financial institutions are also not providing arrangements for digital currency businesses.
It advised the public to carefully evaluate the risks associated with dealings in digital currencies.
“These include risks arising from high volatility in prices, the lack of deep markets and vulnerabilities to cyber-attack which can lead to significant losses.”
In the case of any dispute or losses, the users of digital currencies will not be protected by the existing banking laws.
The central bank is making dealings in digital currencies more transparent in the country.
This is by invoking reporting obligations on digital currency exchange business under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA).
This move, it added, did not mean it is regulating digital currencies.”
Bank Negara yesterday issued for public consultation, an exposure draft on the invocation.
“This 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,” it said in a statement.
The proposed policy sets out the legal obligations, requirements and standards that digital currency exchangers which will be defined under the First Schedule of the AMLA, must carry out as reporting institutions, it added
“Increased transparency will also serve to prevent the use of the digital currencies for criminal or unlawful activities. A digital currency exchanger must also declare its details to the bank as a reporting institution,” it said.
Bank Negara said failure to declare their 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.
The invocation of reporting obligations did not in any way connote the authorisation, licensing, endorsement or validation by the bank of any entities involved in the provision of digital currency exchange services, it added.
New Straits Times