Cryptocurrencies are all the rage right now, and Malaysia is no exception. If you invested early on in the scene, you are probably still feeling comfortable, albeit a little nervous. However, had you gotten into the scene at the height of the pandemic while you felt lost and cryptocurrency was your only solace, we’re really sorry about what happened.
In this blog post, we will take a look at Malaysia’s cryptocurrency scene and discuss all you need to know about it. Here is a little fun fact – cryptocurrency is not recognised as a legal tender by Bank Negara Malaysia (BNM). Section 24 of the Central Bank of Malaysia Act 1958 defines ‘legal tender’ as
(1) Notes issued by the Bank shall, if such notes are not defaced, be legal tender in Malaysia at their face value for the payment of any amount.
(2) Coins issued by the Bank shall, if such coins have not been tampered with, be legal tender in Malaysia at their face value
Here’s the translation from legal English to English English – the Act basically states that only notes and coins issued by BNM are recognised as legal tender (legal payment method).
But I have been making payments using Bitcoin for the past two years. Are
those not legal?
Here’s the thing – the fact that BNM is not the body in charge of cryptocurrency does not make it illegal. In Malaysia, the Securities Commission, established under the Securities Commission Act 1993, is responsible for the cryptocurrency scene here.
How do we know this? – Luno Pte Ltd & Another v Robert Ong Thien Cheng
This case further provides the answer as to whether cryptocurrencies are legal in Malaysia.
Brief facts: Luno Pte Ltd, by accident, did a double transfer of 11.3 Bitcoins to Robert – the ‘mistakenly transferred Bitcoin’. Robert was prepared to return the MYR equivalent (at the time of purchase in July) to Luno. However, Luno refused this – they requested for it to be returned in its original form i.e. 11.3 Bitcoin, and subsequently commenced legal action as Robert refused.
The Sessions Court ruled in favour of Luno (the plaintiffs) and ordered Robert to return the mistakenly transferred Bitcoins (11.3 Bitcoins) or its equivalent value at the time of filing (RM810,837.00).
A short fun fact before we lose you non-enthusiasts – Did you know that if you were paid by someone (or a bank) a sum by mistake, you have a duty to return it? Aw shucks innit? Section 73 of Contracts Act 1950 reads
“A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.”
Key takeaways from Luno Pte Ltd & Another v Robert Ong Thien Cheng
The Sessions Court further added that the term “anything” in the aforementioned Act covers Bitcoin too, recognising that cryptocurrencies too are things of value. This point was affirmed by the High Court making reference to Order 3 of the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 – (the Order).
Digital currency is prescribed to be securities for the purpose of securities laws if:
- It is traded in a place or on a facility where offers to sell, purchase, or exchange of, the digital currency are regularly made or accepted;
- A person expects a return in any form from the trading, conversion or redemption of the digital currency or the appreciation in the value of that currency; and
- It is not issued or guaranteed by any government body or central banks as may be specified by the Securities Commission Malaysia.
While cryptocurrencies may not be a legal tender (as per BNM’s definition), both the Sessions Court and High Court appear to have recognised cryptocurrencies as securities (regulated by the Securities Commission).
Now, what’s the difference between a legal tender and securities?
Legal Tender
Section 24 of the Central Bank of Malaysia Act 1958
Legal tenders are legal payment methods e.g. coins, bank notes (issued by BNM).
Securities
Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019
Securities are market regulated shares, bonds, stocks, and now digital currency and digital token (as per the Order) regulated by Securities Commission.
Being the first reported case on cryptocurrency in Malaysia, this case marks an important development in how the law sees cryptocurrencies and its recognition.
Now, is this a good time to invest in Bitcoin now that the value has gone down? Unfortunately, we do not provide financial advise, but at least now you know that Bitcoin is legal.