In Malaysia, the provision and trading of digital assets as securities is regulated by the Securities Commission Malaysia (SC), and the trading of digital assets is legally permitted only if it is undertaken through an SC-approved DAX platform. In turn, the DAX operator must be registered as Recognized Market Operators RMOs, with the SC before it can lawfully function as an operator in Malaysia.
Under RMO guidelines, DAX operators are required to maintain confidence and integrity through transparency in performing their functions, by correct procedures in respect of trading activities, and through the protection of their investors’ assets. In this respect, DAX operators are obliged to disclose information about their organizational structure, order types, and transactions on the platform.
Malaysia doesn’t tax capital gains on crypto—but frequent trading is considered to be a profession. In Malaysia, cryptocurrency transactions are currently tax-free and digital currencies are not considered assets or legal tender by the authorities. However, (and here’s what often applies when a country is said to be ‘crypto tax-free’) profits from active crypto trading may be regarded as revenue, and thus considered taxable income. Effectively, if the transaction is more of a casual capital gain or ‘unsystematic’, then the profit from such sale and purchase may be deemed tax-free income. However, ‘active, systemic, and repeated’ trading is deemed to be a regular profession and the gains from those transactions will be subject to income tax. Got that?
Basically, the offering and trading of digital assets as securities are legally permitted in Malaysia, subject to the regulatory requirements governing these activities. However, anyone actively considering this form of investment is strongly advised to get legal guidance on the relevant laws and procedures before going ahead. Businesses involved in cryptocurrency are likewise subject to Malaysian income tax.
Initial Coin Offerings – ICOs
Initial Coin Offerings have gained mainstream acceptance around the world, but in Malaysia, ICOs were originally banned and thought to be disreputable owing to the fact that they could be instigated by almost anyone. That said, the Securities Commission (SC), is now offering a more practical way forward whereby issuers of an ICOs submit their application to an Initial Exchange Operator (IEO) operator for approval. If approved, the public may invest in the issuer’s offering from the IEO platform with the issuer also satisfying criteria in terms of governance and a capital requirement of at least MYR 500,000 to qualify for fundraising.
Malaysia is an avid blockchain economy and blockchain and crypto courses and studies abound in University and further education establishments. The Malaysian Industry-Government Group for High Technology (MIGHT), and many banks are already actively promoting blockchain development throughout the country’s Fintech community which covers areas such as security, cryptography, machine learning, and big data analytics.
The Ministry of Science, Technology, and Innovation has established a special task force to study the implementation of blockchain in the country as well as the shariah-compliant component of the technology.