Cryptocurrency Legality in Malaysia: A 2025 Legal Overview

 Authored by Radhia Ghazali

Cryptocurrency is legal in Malaysia, though it is not recognized as legal tender. It operates within a structured regulatory framework primarily governed by the Securities Commission Malaysia (SC) under the Capital Markets and Services Act 2007 (CMSA), with supplementary oversight by Bank Negara Malaysia (BNM) on monetary and anti-money laundering compliance. Together, these authorities ensure that cryptocurrency activities occur within a regulated environment that upholds investor protection, transparency, and financial stability.

Legal Recognition and Classification

The Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 formally classifies certain digital currencies and tokens as securities when they exhibit investment characteristics such as the expectation of profit or reliance on managerial effort. This classification brings most crypto-related activities under the ambit of the SC. Any party intending to operate a digital asset exchange, issue a token, or provide custodial services must obtain the requisite approval or licensing from the SC. Failure to comply constitutes a violation of the CMSA and exposes the operator to enforcement action and severe penalties.

Regulatory Framework and Compliance

The SC’s regulatory approach is grounded in three fundamental principles: investor protection, market integrity, and systemic transparency. Licensed digital asset service providers must adhere to a comprehensive range of obligations prescribed under the Guidelines on Recognized Markets and the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA). These obligations include proper due diligence, continuous monitoring of transactions, and maintaining adequate cybersecurity and risk management measures. Licensed entities must also safeguard client assets through segregation mechanisms and ensure that trading practices are fair and transparent.

Bank Negara Malaysia plays a complementary role by monitoring the financial system’s exposure to digital assets. While BNM does not regulate cryptocurrencies as legal tender, financial institutions that engage with or service digital asset businesses are required to comply with BNM’s reporting, disclosure, and risk management standards.

Licensed Exchanges and Supervision

As of 30 October 2025, there are six digital asset exchanges that have been licensed by the Securities Commission Malaysia to operate legally. These exchanges operate under strict supervision and must demonstrate ongoing compliance with the SC’s operational, governance, and cybersecurity requirements. The SC continues to publish and update the official list of licensed exchanges to ensure that investors can identify legitimate platforms and avoid unlicensed or fraudulent operators.

Legal Status and Limitations

Although cryptocurrency ownership and trading are lawful, digital assets do not carry the status of legal tender in Malaysia. The Central Bank of Malaysia Act 2009 recognizes only the Malaysian ringgit as legal currency. Accordingly, merchants or individuals who accept cryptocurrencies as payment do so at their own risk, as such transactions are not protected or regulated by Bank Negara Malaysia. This limitation reflects the government’s intention to preserve monetary sovereignty while permitting regulated investment and trading activities in the crypto market.

Taxation and Reporting

Profits arising from cryptocurrency activities are taxable in Malaysia if they constitute income in nature. Under the Income Tax Act 1967, persons who trade or invest in cryptocurrencies systematically or as part of a business will be subject to income tax. Occasional or passive investors are generally exempt unless their transactions amount to a trade. The Inland Revenue Board (LHDN) requires taxpayers to maintain adequate documentation and transaction records for verification. Discussions are ongoing regarding the introduction of a dedicated framework for digital asset taxation, in line with international standards such as the OECD’s Crypto-Asset Reporting Framework.

Enforcement and Policy Developments

The Malaysian authorities have intensified enforcement actions against unlawful or fraudulent crypto-related activities. These include operations of unlicensed exchanges, the promotion of illegal investment schemes, unauthorized mining operations involving electricity theft, and the issuance of fraudulent or misleading tokens. The SC and BNM continue to collaborate in monitoring the integrity of the digital asset ecosystem and in addressing risks to market confidence and investor safety.

At the same time, Malaysia remains actively involved in international digital innovation. The government participates in cross-border Central Bank Digital Currency initiatives, including Project Dunbar in partnership with the Bank for International Settlements. Through this dual approach of innovation and enforcement, Malaysia aims to promote legitimate fintech growth while safeguarding financial integrity.

Legal Risks and Liabilities

Despite its legality, participation in cryptocurrency activities in Malaysia entails several potential legal risks. Entities or individuals who operate digital asset exchanges or issue tokens without SC authorization commit an offence under the CMSA. Such contravention is punishable by imprisonment of up to ten years or a fine of up to ten million ringgit, or both.

Persons who engage in fraudulent or misleading crypto schemes may incur both civil and criminal liability. Victims of misrepresentation or deceit may seek redress under the CMSA or through common law actions in tort or contract. Similarly, any person who fails to comply with anti-money laundering obligations, such as conducting proper customer due diligence or reporting suspicious transactions, faces penalties under the AMLA, which include imprisonment and substantial fines.

Directors and officers of companies involved in crypto-related businesses must also be aware of their fiduciary and statutory duties. Mismanagement or diversion of investors’ assets may give rise to personal liability under company law or attract prosecution for criminal breach of trust under the Penal Code. Tax non-compliance, including the failure to report taxable crypto income, may constitute tax evasion under the Income Tax Act 1967.

The Future Outlook

Malaysia’s legal framework for digital assets continues to evolve. Future regulatory developments are expected to provide greater clarity on stablecoins, tokenized assets, and decentralized finance (DeFi) operations. The SC and BNM are likely to strengthen cooperation on cross-border regulatory issues and enhance public education on cryptocurrency risks. Overall, Malaysia’s approach reflects a pragmatic balance between technological advancement and legal accountability.

Conclusion

The legal status of cryptocurrency in Malaysia in 2025 illustrates a maturing and disciplined approach to financial innovation. The country allows digital asset ownership and trading within a tightly regulated structure, ensuring that innovation does not compromise investor protection or market integrity. While Malaysia welcomes legitimate participation in the crypto economy, it maintains firm enforcement against unlicensed, deceptive, or unlawful activities. For businesses and investors, compliance with the requirements of the Securities Commission, adherence to AMLA obligations, and observance of taxation laws are essential to operating lawfully in this evolving area of digital finance.