BANK Negara Malaysia yesterday warned that digital currencies are not legal tender in the country, advising the public to carefully evaluate the risks in such dealings.

The central bank said in a statement that financial institutions in Malaysia did not provide arrangements for digital currency businesses, NST Online reported,

BNM said digital currency users were not protected by existing banking laws in the case of any dispute or losses arising from risks, such as high volatility in prices, the lack of deep markets and vulnerabilities to cyber attacks.

The central bank is also making dealings in digital currencies more transparent in Malaysia by invoking reporting obligations on digital currency exchange business under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA).

“This move does not mean BNM is regulating digital currencies,” it said yesterday, as it issued an exposure draft on the invocation for public consultation.

The proposed policy only sets out the legal obligations, requirements and standards that digital currency exchangers, which will be defined under the First Schedule of the AMLA, must carry out as reporting institutions.

It did not mean that digital currency exchangers will receive authorisation, licensing, endorsement or validation by the bank of any entities involved in the provision of digital currency exchange services.

“This is to ensure that effective measures are in place against money laundering or terrorism financing risks associated with the use of digital currencies and to increase the transparency of digital currencies activities in Malaysia.

“Increased transparency will also prevent the use of the digital currencies for criminal or unlawful activities. A digital currency exchanger must also declare its details to the bank as a reporting institution,” BNM said.

Those who fail to declare their details or to comply may be subjected to enforcement and non-compliance actions as provided under the AMLA, as well as potential termination or denial of use of financial services in Malaysia. – December 14, 2017.