Malaysia Cryptocurrency License — A jurisdiction for bold projects
- October 20, 2021
- Will Turner
The paradisiacal country of Malaysia, in Pacific Asia, is opening up to cryptocurrencies. The Southeast Asian country, spread on 2 territories and almost 900 islands, has seen its economy soar since the 70s. One of the most dynamic economies of the region since then, Malaysia has then invested in finance and IT to join the party of the Asian dragons. Many companies start to register for a cryptocurrency license in Malaysia. A gain of status that is symbolized by the famous Petronas Twin towers in Kuala Lumpur.
Building on the knowledge gained by setting up a Securities Exchange Commission and a stock exchange, Malaysia has been observant of the evolution of Bitcoin and cryptocurrencies after 2017 and the public acknowledgment of the blockchain technology.
Add a scoop of ambition to become a major player on the continent and here we are: the cryptocurrency trading license in Malaysia, officially known as the Digital Asset Exchange status, or DAX.
Malaysia wants to attract major players of the cryptocurrency trading industry
Malaysia’s framework follows a very straightforward goal: making the country a home for big players of the exchange market. The DAX status is specifically targeted at ambitious and wealthy projects. And it comes with an incentive: the Malaysian regulation is one of the few in the world to come with its own set of AML-KYC rules, instead of enforcing the FATF Guidelines. And these compliance regulations are due to be more advantageous, less costly for the company to set-up.
The idea is to enable big exchanges by giving them more flexibility in the way they manage their clients. This is why the blockchain license in Malaysia is so attractive. It provides a trustful and solid framework to the company, while giving it some room for organizing its clients’ onboarding as it feels more suitable.
Should I consider getting a cryptocurrency license in Malaysia for my blockchain company?
There are two simple questions to answer to assess if Malaysia is a good option for your project. Chances are, that if the answer to both questions is “yes”, then Malaysia will be the best Asian jurisdiction to settle for you.
The first question is: are you a cryptocurrency exchange and/or trading platform? The Digital Asset Exchange framework, as the name suggests, is tailored for exchanges only. This might imply limitations for DeFi projects, for some DApps or NFT usage. If your business model is slightly different than a traditional exchange, you should talk about it with your corporate service provider.
The second question is: what is the scale of your project? Or in other words: is the initial investment going to be massive? Malaysia only grants its approval to projects with a very consequent backing. If you are starting up, still shaping the origin story of your rags-to-riches tale, there are better jurisdictions to consider.
What is the process to successfully get registered as a Digital Asset Exchange (DAX) in Malaysia?
As we explained earlier, Malaysia is very serious about the consistency of its licensees. Not only substantial funding is required, but also to set up shop in the country. The first step is therefore to acknowledge all that is expected by the Securities and Exchange Commission to register your crypto company.
In addition to the financial backing, you must register a local company and create strong risk-management policies. This is the counterpart to a lighter AML-KYC framework: the SEC wants guarantees about the right conduct of your business and the right handling of your customers.
Then, local personnel have to be appointed for management and key operations. And they have to reside in Malaysia, and of course work from a registered office space.
Once all the substance has been set, the share capital has to be raised to an important amount, fixed by the Securities and Exchange Commission. This can be seen as an “entry ticket”.
Other jurisdictions to consider in Asia for your crypto business
As you understood, Malaysia’s framework is specifically tailored for certain criteria, and not all crypto entrepreneurs fit the mold. But there are other options in the region that may be more suitable for different projects. It is worth looking around. Here are a few examples:
The Philippines is also a growing Southeast Asian economy, with a crypto framework that is comparable to the Malaysian one. It offers a bit more flexibility but the ongoing requirements can be considered more intensive.
Singapore is famous in the FinTech sphere for a reason: it is a dynamic, high-level economy, and it provides a very trusted and authoritative framework. Singapore’s approach to crypto business blends in with how they consider financial services in general, which allows for very innovative projects.
Anyhow, to understand all the aspects of setting up a cryptocurrency licensed company, the wise thing to do is to check up with a corporate services provider with expertise in the blockchain field.