BNM: We don’t regulate digital currencies, you invest at your own risk

PETALING JAYA: Bank Negara Malaysia (BNM) yesterday said its move to impose reporting obligations on digital currency exchanges is not a move to regulate the digital currency market and that investors are going in at their own risk.

BNM advised the public to carefully evaluate the risks associated with dealings in digital currencies, including risks arising from high volatility in prices, the lack of deep markets and vulnerabilities to cyber attack which can lead to significant losses.

“Users of digital currencies will not be covered under established disputed resolution arrangements which exists for regulated financial institutions in the event of any dispute or losses.”

The central bank said it will continue to monitor and assess the risks posed to the financial system by such activities to ensure that the integrity of the financial system is not compromised.

BNM highlighted that the reporting obligation on the exchanges is the first step towards making digital currency activities more transparent in Malaysia, but it does not in any way connote the authorisation, licensing, endorsement or validation by BNM of any entities involved in the provision of digital currency exchange services.

Last month, BNM governor Tan Sri Muhammad Ibrahim said the central bank will designate persons converting cryptocurrencies into fiat money currencies as reporting institutions under the Anti-Money Laundering AntiTerrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA) from next year, which was seen as a move to regulate digital currencies.

However, BNM stressed in a statement yesterday that digital currencies are not legal tender in Malaysia and that digital currency businesses are not covered by prudential and market conduct standards or arrangements that are applicable to financial institutions regulated by the central bank.

“This is consistent with reporting obligations currently invoked under the AMLA on other reporting institutions such as legal or accounting firms and real estate agents which do not fall under the bank’s purview.”

The central bank is to hold a media briefing today on digital currencies.

BNM yesterday issued for public consultation an exposure draft on the invocation of reporting obligations on digital currency exchange business as reporting institutions under AMLA, which aims to ensure that effective measures are in place against money laundering/terrorism financing risks associated with the use of digital currencies and to increase the transparency of digital currency activities in Malaysia. Written feedback on the specific requirements set out in the exposure draft must be submitted to BNM by Jan 14, 2018.