Policing Cryptocurrencies

By: Sonny Zulhuda

This note was a reproduction of the same published by the New Straits Times here.

You-Can-Use-Bitcoins-Here

BANK Negara Malaysia (BNM) Governor Tan Sri Muhammad Ibrahim was recently quoted in theNew Straits Times as saying that guidelines governing cryptocurrencies were expected to be unveiled by the end of the year, which is less than three months from now.

Cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of the banking system. It is an emerging financial technology enabled by innovation and is increasingly popular among Internet users. It challenges financial and regulatory rules on currency and payment systems.

BNM’s statement could not have come at a better time as cryptocurrencies, such as Bitcoin, are increasingly popular in Malaysia. Not only do we see companies and communities accepting Bitcoin, but small businesses, such as a nasi kerabu stall in Kota Baru, Kelantan, were also reported as accepting payment in Bitcoin.

As with any new and disruptive technology-based business phenomenon, cryptocurrency has its pro and cons. Proponents view it as a natural solution for fast-growing electronic commerce through a ubiquitous technology like the Internet. They also argue that cryptocurrencies benefit people who are otherwise denied access to banking services.

While allowing cryptocurrencies may signal our business friendliness to the digital economy, it also triggers risks and uncertainties. The greatest of them is their potential use in crimes, such as money laundering and financing terrorism. There have been instances in other countries where Bitcoin has been used in the Dark Web for illicit transactions. Indeed, the anonymity that comes with the use of cryptocurrency is a cause for concern as it makes it harder to ensure consumer protection.

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