Bank Negara to issue guidelines on cryptocurrencies
KUALA LUMPUR: Two weeks after the Securities Commission issued a stern warning to investors putting money into cryptocurrencies, Bank Negara has now said it will be issuing its guidelines on the issue by year-end.
Bank Negara governor Tan Sri Muhammad Ibrahim has been looking into the matter and the details, as the new form of currency has attracted a lot of attention around the globe.
“We hope to come out with guidelines on cryptocurrencies before the end of the year: in particular, those relating to anti-money laundering and terrorist financing. We want to ensure that there are clear guidelines for those who want to participate in this sector,” he said on the sidelines of the Global Symposium on Development Financial Institutions.
The central bank last commented on cryptocurrencies more than three years ago when a statement was issued on Jan 2, 2014 saying that bitcoin was not recognised as legal tender in Malaysia, and that it did not regulate the operations of bitcoin.
“The public is, therefore, advised to be cautious of the risks associated with the usage of such digital currency,” it had earlier said.
China clamped down on bitcoin recently, with news wire reports saying that the second-biggest economy in the world had seen several large bitcoin exchanges closing down after the government there banned fundraising using the cryptocurrency.
Meanwhile, Muhammad reiterated that the ringgit should always be reflective of Malaysia’s economic strength and fundamentals.
“What is important is not so much the level of the ringgit, but that the ringgit must reflect the economic strength of Malaysia. If economic growth and inflation are under control, then the exchange rates should reflect that,” Muhammad said.
He said a company’s competitiveness should not be solely derived from exchange rate weakness and should also be measured on other factors.
“It is very important that the ringgit reflects our fundamentals. We have been very clear to the cooperations that they should not just rely on the exchange rate for competitiveness. They should (also) rely on productivity and innovation to sell to others and cannot just rely on exchange rates when marketing abroad,” Muhammad said.
He also said the central bank was monitoring closely inflation levels, given the rising local petrol prices.
“The inflation numbers that we saw in the last monetary policy committee meeting is still within projections. Inflation numbers are very much dependent on global oil prices, and so far, we do not expect this to increase at such a rate that would have implications on inflation rate projections, not yet,” he said.
“But we are always keeping an open mind. As the data comes in, we will look at the implications on inflation and we will certainly disseminate this information as it comes in,” he added.
He said that with economic growth being entrenched and inflation sitting within the expected range, it gives Bank Negara a little room for flexibility in terms of policy formation.
“The next meeting is in early November and we will look at the data again to see where we should position the economy. It is very important that our interest rate levels must be at a level that would promote growth and ensure inflation is managed strongly,” Muhammad said.
In his speech, Muhammad said properly structured development institutions could be a potent agent of change for private-sector investment, drive growth and forge inclusive societies.
He said that more than ever today, development financial institutions needed to step up to promote new growth areas.
“They should perform a broader role to stimulate economic activity that would not otherwise take place. They could also improve the quality and scale of such activities. They can provide unique value propositions in terms of advisory and nurturing new growth sectors to become profitable, and thus, attractive for private investors,” he said.
He highlighted the rise of the Korean cultural phenomenon known as the Korean Wave or “Hallyu”, now a new growth area for the Korean economy, with the exports of culture content, including films and music, at an estimated value of US$83.2bil.
“This extraordinary rise of the Korean Wave can be attributed to the growth of investment in the creative industry. The industry was boosted by the government’s strategy to prioritise the sector as an engine of growth after the Asian financial crisis,” he said.
“The Korean government had earmarked 1% of the national budget for development financial institutions to kickstart the sector. Following their footsteps, domestic conglomerates like Samsung and Daewoo started investing in film financing and video production,” Muhammad added.
He said this example showed that development financial institutions were the first to spearhead investments in the film and music industry.
“At that time, commercial banks did not have the capability to assess the viability of the industry, nor accept the intangible assets offered as collateral. It was only much later, when the industry recorded healthy profits, that private investments followed,” he said.
“The success speaks for itself. Between 2008 and 2011, private domestic and foreign investments in the culture content industry had quadrupled to more than US$157mil,” he added.