Malaysia Regulates Cryptocurrencies as Securities, Not Legal Tender

Malaysia has adopted a cautious approach to regulating cryptocurrencies, treating them as securities rather than legal tender. This regulatory framework is overseen by key bodies such as the Securities Commission Malaysia (SCM), which governs digital assets under the Capital Markets and Services Act 2007, and the central bank, Bank Negara Malaysia (BNM), which monitors systemic risks and has warned against using cryptocurrencies for payments. The Inland Revenue Board of Malaysia (IRBM) enforces tax laws on crypto income.

Historically, Malaysia's central bank issued warnings about cryptocurrencies in the early 2010s due to concerns over volatility and fraud. By 2019, certain digital currencies and tokens were classified as securities by the SCM, requiring all crypto exchanges to obtain licenses and comply with regulations. In February 2022, the government strengthened Anti-Money Laundering (AML) controls and adopted the Global Crypto Travel Rule, indicating a more structured approach to regulation.

The regulatory framework in Malaysia focuses on treating cryptocurrencies as securities, with the SCM supervising digital currencies, BNM ensuring monetary stability, and IRBM handling crypto taxation and compliance. Crypto exchanges must register with the SCM and follow guidelines for establishing Recognized Markets. As of 2025, four platforms—Luno, MX Global, SINEGY Technologies, and Tokenize Technology—are officially registered and licensed.

AML and Know-Your-Customer (KYC) protocols are mandatory for exchanges, with the Crypto Travel Rule requiring the sharing of sender and receiver data on transactions to combat financial crime. There are no capital gains taxes for crypto investments, but revenue from frequent trading is taxable as income. Initial Coin Offerings (ICOs) and Security Token Offerings (STOs) are regulated by the SCM, requiring similar disclosure and registration standards to traditional securities.

Malaysia allows crypto trading under controlled conditions but does not advocate using crypto as a medium of exchange. BNM stresses that cryptocurrencies are not legal tender and should not replace the ringgit. There is no direct regulation of crypto mining, but it may be regulated under financial rules if attached to large-scale mining activities. Malaysia is exploring the introduction of a Central Bank Digital Currency (CBDC) to improve payment efficiency and resilience, considering both wholesale and retail CBDCs.

Non-compliance with crypto regulations can result in fines or jail sentences. Activities conducted without a license or in violation of AML and securities law requirements are subject to penalties. Malaysia encourages innovation through wider fintech efforts, such as the annual SCxSC FinTech Conference, where startups and regulators discuss emerging technologies. Approximately 20% of Malaysians own digital assets, but business adoption remains limited due to the regulatory stance and non-legal status of crypto.

There are inconsistencies in Malaysia’s crypto regulation, particularly with peer-to-peer (P2P) trading. Licensed exchanges are well-regulated, but unregistered platforms often operate in legal gray areas. Enforcing rules on global platforms like Binance is challenging due to the decentralized nature of cryptocurrency transactions, making AML compliance difficult. Public perception of cryptocurrencies is mixed, with adoption rising despite government warnings.

In January 2025, Malaysia’s prime minister hinted at new crypto and blockchain legislation, which could provide regulatory clarity and safe innovation. BNM is considering the use of CBDC for payments and financial stability. Experts believe Malaysia will introduce clearer rules on crypto assets, including potential tax reforms and formal recognition of some crypto products, but crypto is unlikely to become legal tender in the short run. Malaysia’s regulatory choices may influence crypto policy in neighboring countries, supporting foreign investment and regional leadership in digital finance.

Malaysia’s approach to cryptocurrencies is moderate, permitting crypto assets under the oversight of the SCM and subsidiary financial bodies. The country is also exploring blockchain innovation and the potential introduction of a CBDC. To stay compliant and avoid penalties, investors and businesses should be aware of local regulations, as changes are expected in the near future.