Bank Negara to meet digital coin exchangers, seeks feedback on reporting obligations

KUALA LUMPUR: Bank Negara Malaysia (BNM) is scheduled to meet the active digital currency exchangers today with regard to the reporting obligations under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA).
“We’re also issuing exposure draft to them for their comments,” deputy governor Abdul Rasheed Ghaffour said at a media briefing on “Making Digital Currencies Transparent in Malaysia” here last Friday.
The exposure draft states that upon the initial acceptance of a customer, reporting institutions are required to regularly review and update the customer’s risk profile based on the level of money laundering and terrorism financing (ML/TF) risks.
“Reporting institutions are required to conduct customer due diligence on all customers and the persons conducting the transaction in the circumstances set when the reporting institution establishes business relationship with the customer; and when the reporting institutions have any suspicion of ML/TF.”
Among the data needed by the central bank are the number of transactions, including the conversion from digital currency to fiat money and vice versa as well as conversion from a digital currency to another; the value of the transactions, net buy and sell position, purpose of transactions, payment method and the number of customer accounts.
Abdul Rasheed noted that the regulators do not have intention to ban digital currency trading as it is part of market “innovation and creativity”.
“What is important is we need to balance this between public interest and the integrity of the financial system. We need to take a careful approach and considerations on this.”
Abdul Rasheed expects the reporting obligations on the digital currency exchangers will come into effect early next year after obtaining the government gazette order.
There are four active digital currency exchangers in Malaysia – Luno, Coinhako, XBit Asia and PinkExc.
In a brief reply to SunBiz, a Coinhako spokesperson said: “Yes, we will be attending (the briefing). ”
According to Abdul Rasheed, the average monthly digital currency transactions amount to RM75 million, which is very minimal compared with the total market capitalisation of US$420 billion (RM1.71 trillion) for digital currencies globally.
Nonetheless, Abdul Rasheed sees the recent spike in bitcoin price as a bubble. If you look at the price, it is clear that it is a bubble. If you look at other investments, I don’t think you can have so high returns.
“It’s (the returns) really akin to the financial scams. Anything with high returns will have high risks,” he said.
Bitcoin’s price has risen over 1800% year to date. As at 8pm last Friday, it traded at US$17,824 (RM72,690).
A local bitcoin pioneer who declined to be named said he was surprised bitcoin is associated with a bubble as it shouldn’t be viewed as an asset class.
“People don’t understand it (bitcoin). It is supposed to be a payment system. Bitcoin is for the people to keep their database, so it is just an application and a blockchain,” he told SunBiz.
However, he is positive on BNM’s move to come out with the exposure draft on digital currency as it will “get the bad players out from the market”.
Stressing that digital currencies are not legal tender in Malaysia, Abdul Rasheed said it is too early to comment whether they will be recognised and regulated in the future. “We need to gather additional information.”
On initial digital coin offerings, he said they are under the purview of the Securities Comission (SC) but BNM will be working closely with the SC on this.
The SC has cautioned investors on the emergence of digital token-based fundraising or investment schemes.