How Malaysia’s Legalization of Bitcoin Could Bring Millions of New Users

Earlier this week, Cryptocoinsnews reported that the Malaysian government and its financial regulators are set to regulate the Malaysian bitcoin industry and legalize the usage of the digital currency within the country.

Bank Negara Malaysia (BNM) governor Muhammad bin Ibrahim, a Malaysian central bank official, stated:

“We hope that by year end, BNM will be able to come out with some guidelines on cryptocurrency, particularly those related to anti-money laundering and terrorist financing. We want to ensure that there are clear guidelines for those who want to participate in this sector.”

Why Malaysia’s Potential Legalization of BItcoin is a Big Deal

For many years, the Malaysian government and its central bank have imposed strict capital controls and restricted the outflow of the Malaysian ringgit outside of the country. Consequently, expat workers in Malaysia have struggled to send large sums of money or remittances to their families overseas.

In late 2016, the Malaysian government was hit hard with the massive devaluation of the Malaysian ringgit. In a short period of time, the country’s national currency declined by around 2 percent in value against the world’s largest reserve currencies such as the US dollar. As a temporary solution, BNM and commercial banks imposed strict capital controls, prohibiting any offshore trading of the Malaysian ringgit and derivatives.

Several large-scale multi-billion dollar Western commercial banks were threatened by BNM and the country’s financial regulators of repatriation. According to an executive of a major Western bank who requested to anonymity due to the sensitivity of the issue, the Malaysian central bank demanded commercial banks to comply with the capital controls and new regulations. BNM also told the banks that the failure to comply to newly established regulatory frameworks will result in the central bank disallowing commercial banks to move their investments and money outside of Malaysia.

“There’s a massive back and forth going on between banks and Bank Negara Malaysia (BNM) now. This is a type of indirect capital control … I see a flood of people exiting Malaysia,” a banker at a foreign bank in Malaysia which deals in foreign currency transactions told Reuters in an interview.

Since then, for the past 10 months, both commercial banks and remittance service providers have been subjected to strict capital controls and inefficient regulations. Expat workers have been struggling to search for secure and cheap methods of sending money back to their families in their home countries.

The legalization of bitcoin in Malaysia could provide an alternative financial and remittance system to expat workers and foreign investors to move money out of the country efficiently. Already, leading bitcoin remittance service providers and brokerages such as Coins.ph, which recently secured $19 million in funding from leading venture capital firms including Nasper, have expanded their operations to Malaysia.

Through the decentralized network of bitcoin, expat workers will be able to send money back to their families. Most countries in Asia including the Philippines, Thailand, Vietnam, Japan, and South Korea have evolved into established and well regulated bitcoin markets.