Bank Negara Malaysia hopes to come up with guidelines on cryptocurrency by year-end, particularly those related to anti-money laundering and terrorist financing, said Governor Tan Sri Muhammad Ibrahim.
“We want to make sure that there will be a clear guidelines for those who want to participate in this particular sector,” he told reporters at the Global Symposium on Development Financial Institutions (DFI) today, adding that the central bank is looking at the details of cryptocurrency.
Cryptocurrency, of which Bitcoins are by far the most popular, exists almost wholly in the digital realm and has no asset backing it. Bitcoin generation, known as mining, while open to anyone with a “mining application” on their computer, needs a great deal of computing power to solve complex algorithms which are later verified with the entire bitcoin network.
The anonymous nature of cryptocurrency transactions has long fuelled concerns of money laundering and tax evasion.
Bitcoin, for example, was trading at US$3,985 (RM16,700) just before 5pm. This is from a high of US$4,979 at the start of month, before Chinese authorities’ closure of Bitcoin exchanges and a ban of funding for Initial Coin Offerings in China, sent the cryptocurrency on a downward trend. China reportedly trades 10% of 16.52 million Bitcoins in circulation.
Earlier, he said Malaysia is encouraging DFIs to improve performance measurement frameworks to better capture the development impact of business activities.
Muhammad said more effort is required on critical appraisal of their development impact. It is much needed to sharpen the development focus, redirect and amplify the impact of financing. It will also provide the impetus for DFIs to focus on other interventions that can increase their impact.
“We intend to work with their leadership and other stakeholders in government in the coming months to address a more focused delivery of mandates. In this respect, improving performance measurement frameworks and increasing transparency in the operations will be important areas of focus,” said Muhammad.
He said three key traits that will allow DFIs to promote and champion new growth area are first, DFIs must have specific mandates to develop and prioritise niche segments identified to be of strategic and economic importance. These will give them legitimacy with funders and partners.
Second, DFIs must have affiliations with government, ministries and agencies to facilitate the design of appropriate government support, which enables them to mitigate the higher risks.
Third, DFIs must have a broader focus on socio-developmental goals, which allows risk-return trade-offs to take into account positive externalities for the economy.
Meanwhile, on the impact of a possible Fed hike, Muhammad said Malaysia’s economic growth is entrenched while inflation is within the range expected, which will give the central bank more flexibility in terms of policy formulation for Malaysia.
He said the next Monetary Policy Committee meeting in November will look at the data again and determine Malaysia’s economic position.
“It’s important that at any point of time, our interest rate level must be at a level that will promote growth and at the same time, making sure that inflation is always being managed strongly.”
Despite inflation numbers being dependent on global oil prices, Muhammad said it does not expect global oil prices to increase in such a rate that will have implications on the country’s inflation rate projection.
He urged corporates not to rely on the exchange rate for competitiveness, but bank on productiveness or innovation to sell.
“What’s important is not the level of the ringgit. The ringgit must reflect the economic strength of Malaysia. If economic growth and inflation are under control, the exchange rate should reflect that fact. The exchange rate is a reflection of our fundamentals,” Muhammad explained.
- The Sun Daily