Cryptocurrency Not To Be Considered 'Legal Tender'; Centre To Treat It Like Stocks & Bonds
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Legal Tender? The Regulation of Cryptocurrencies
Cryptocurrencies will never become legal tender
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Demystifying Crypto: Digital Assets and the Role of Government
Cryptocurrencies not recognised as legal tender in Malaysia, says deputy minister
Useful assets:Although digital assets are not recognised as legal tender, Yamani added
it still has many different usage including as a class asset that can
be invested in
Cryptocurrencies are still not recognised as legal tender in Malaysia as they do not exhibit characteristics of universal money, says Deputy Finance Minister II Yamani Hafez Musa.
Yamani said cryptocurrencies, also known as digital assets, are also not a payment instrument that is regulated by Bank Negara. `
“Digital assets such as bitcoin and Ethereum are not suitable to be used as a payment instrument as these assets do not exhibit characteristics of money. `
“In general, digital assets are not a store of value and a good medium of exchange. `
“This is due to the state of digital assets which is exposed to volatility as a result of speculative investments,” he said when replying to a question raised by Nurul Izzah Anwar (PH - Permatang Pauh) in Dewan Rakyat on Thursday (March 3). `
Nurul Izzah had asked about the government’s role in monitoring and regulating currency as well as cryptocurrency assets. `
She also asked if the government had any plans to create digital currency taking into account Bank Negara’s involvement in Project Dunbar for international money transfers using blockchain technology. `
In explaining the volatility of cryptocurrency, Yamani said bitcoin hit a peak of US$65,000 (RM272,382.50) in April 2021 but quickly saw a decline of 50% the following week. `
He also said cryptocurrency is exposed to the risk of theft in which statistics from 2011 to 2021 showed that digital assets worth US$12bil (RM50.29bil) have been stolen through cyberattacks and hacking. `
He added that bitcoin is also only able to process 10 transactions per second compared to 65,000 transactions per second on current payment systems such as Visa. `
“Also, what is important is the huge impact on the environment because the electrical power that is used to process one bitcoin transaction can process 1.2 milliob visa transactions. `
In 2020, the bitcoin network used 132 terra-watts per hour which is equivalent to the entire electricity consumption of Argentina,” he said. ` Yamani added that currently, Bank Negara has also not decided to issue a central bank digital currency (CBDC) as the country’s domestic payment systems including the Real-time Retail Payments Platform continues to operate safely and efficiently to support Malaysia’s economic needs and allows real-time digital payments. `
“Additionally, the monetary policy tools and existing finances also remain effective in maintaining monetary stability and the country’s finances,” he said. `
Although digital assets are not recognised as legal tender, Yamani added it still has many different usage including as a class asset that can be invested in. `
As such, he said the Securities Commission (SC) as the market regulator has set digital assets as a security under the law and is responsible to regulate its trading activities.-
China's Bitcoin trading has plunged to 10 percent of global share from 90 percent, and the country has effectively curbed the speculation of crypto currency trading as part of an effortto fend off domesticfinancial risks and restore financial order, the central bank said on Thursday.
We’re almost well into the third quarter of 2020 – have you made headway in any of this year’s financial priorities and goals? Or perhaps you have been thrown off guard by the state of affairs in by the Covid-19? In a challenging environment like now, it is even more crucial to sit down and do a critical review of your latest financial status.
TIME flies by quickly when you’re going about your daily grind. We’re almost well into the third quarter of 2020 – have you made headway in any of this year’s financial priorities and goals?
Or perhaps you have been thrown off guard by the state of affairs in by the Covid-19? In a challenging environment like now, it is even more crucial to sit down and do a critical review of your latest financial status.
Loss of livelihood, pay cuts, unemployment, business closures, and a looming global recession – this is the trail of devastation left by a virus which has played havoc around the globe.
Interesting enough, if this health crisis is not enough to shake you into action to take charge of your finances, then what will?
According to the Oxford English dictionary, procrastination is defined as a postponement, “often with the sense of deferring though indecision, when early action would have been preferable, ” or as “defer[ing] action, especially without good reason.”
Throughout my experience as a licensed financial advisor, I have met many people who procrastinated over reviewing their financial status, let alone in growing their wealth. There are many reasons for this. Some lack the knowledge on where to begin, while others may cite the poor state of economy or our poor tax regime. However, the bigger reason usually lies in our tendency to procrastinate.
Procrastination is one of mankind’s biggest weaknesses – we have all procrastinated doing something important at some point. But in the world of finance, procrastination can result in an opportunity loss to mitigate risk and in growing wealth – sometimes an opportunity which can never be recovered. After all, it takes time for any investment to compound into a significant figure.
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In this article, I’m going to highlight some of the common reasons people use to put off taking actions on their financial matters.
> “I don’t have enough time to plan and invest”
This is a common reason people often say, when putting off investing. In today’s economy, most households require both spouses to work full-time jobs in order to afford the lifestyle that they desire. In the office, you’re stressing about deadlines, projects to complete, and deadlines to meet.
At home you’re likely seeing to your family, social life, and chores, and any leftover time is probably spent away vacationing to rejuvenate so you can rinse and repeat. Add kids to the equation, and you’ll barely have any time left to breathe.
Who really has the time to spend to research, plan and invest? After all, you still have 20 years headstart till your retirement, you should be able to put it off for later, right?
Wrong. Pushing things for later is comfortable, as you convince yourself that it will get done eventually. However, as most of us know by now, later is a concept that is never ending. There is always a “later” to convince yourself about. Before you know it, too much time would have passed and you’ll have too little time to play catch up to achieve the financial goals you could have well achieved if you started earlier.
What you need to do: Set a date and time and clear your schedule. If being at home is too much of a distraction with the family present, then find a place where you can be isolated to focus on your financial planning. Alternatively, outsource these efforts to an independent financial advisor who can review your financial status and manage the wealth for you.
> “I don’t have enough money to plan and invest”
Most people don’t realise it, but having enough money is a matter of perspective. If you don’t have enough money to invest when you’re earning RM5,000 a month, do you think you will have enough to invest when you’re earning RM50,000 a month? Believe it or not, I have met several people earning around RM50,000 or more per month and still lament about not having enough to save and invest.
We always think along the lines of “if only we make more money”, but once we actually start making more money, our expenses and lifestyle will also go up a notch.
The famous Parkinson’s Law coined by C. Northcote Parkinson in his book The Law and The Profits illustrates this concept best. The law says that work expands to fill the time that is allocated to complete it. In other words, if given a 24-hour deadline, a 20-minute job will take a day to complete.
He goes on to say that individual expenditure does not only rise to meet income but it tends to surpass it, and probably always will. So, if you’re waiting for a time when you feel you have enough money to save and invest, that time will never come.
What you need to do: Take a long hard look at your expenses. This is critical since we are now in challenging economic times. Mindfully track your spending habits for a month and cut back on luxuries that you can live without. If it helps, set up a standing instruction with your bank to automatically transfer a portion of your salary into another bank account. Use that to start investing. Every small portion helps, so don’t think that cutting back on a small luxury is insignificant.
> “I don’t really need to invest”
People won’t admit to thinking this, but they do. This fallacy of not needing to invest stems from the fact that when they retire someday, they will have their EPF savings to rely on. Technically, if you are earning a comfortable amount and do not make any EPF withdrawals before you retire, you may be right in thinking this.
However, this is hardly the case. EPF has reported that more than two-thirds (68%) of EPF members aged 54 had less than RM50,000 in EPF savings, while only 18% of its members had the minimum savings target of RM240,000 in their account by 55. This amounts to a monthly withdrawal of RM1,000 to cover basic needs for 20 years – sufficient if you want to live a basic retirement lifestyle, but nowhere near what is needed for a comfortable retirement in a middle-class lifestyle.
So if you’re thinking of relying mainly on your EPF savings, think again. Your EPF should act as an additional retirement fund on top of your other retirement savings, instead of being the only pillar in your retirement plan.
What you need to do: Start planning now for additional retirement savings. Before you invest, determine the lifestyle that you want to live when you’re retired and calculate how much you’d roughly need over the span of your retirement. Don’t know where to start?
Use a holistic financial planning app, like iWealth, to do a comprehensive calculation on your retirement and other major financial goals. Remember to factor in inflation.
While half of the year has flown by just like that, it’s never too late to examine your financial health and take the necessary steps to protect and grow your wealth.
Over the years I’ve shared many articles to inspire middle class folk like yourselves to take control of your financial destiny.
I certainly hope this knowledge has proven useful and relevant to your personal circumstances.
However, I also hope that you have begun putting into place some of these practices. Today, you may have gotten a better idea of what has been stopping you from investing properly.
Procrastination is a very human trait – but if you’re able to identify what’s been holding you back and take the necessary measures to monitor yourself and counter this, you’ll already have the upper hand on your future.
Remember, true power comes from knowledge. But knowledge without action, is useless.
During good times, there may not be an urgency to act. But we have now arrived at an unprecedented juncture where there will be a cost or consequence to our inaction. If this is not the time to take the bull by the horns, then when?
Businesses are embracing it by coming up with their innovations and startups
A BUZZWORD growing in popularity in the financial world today is “fintech”, short for financial technology, which in a nutshell refers to the use of technology to deliver faster and cheaper financial services.
Going by some predications, fintech could take a big chunk of business away from traditional banks as it is being run by smaller more nimble start-ups. But the debate is still out there as to how much that chunk will be. In Malaysia in particular, fintech’s presence is still nascent and small. Fintech transactions totalled a mere US$6.37mil this year compared with a global figure of US$769.3bil, according to Statista, an online statistics provider.
It however predicts that fintech transaction values to grow to US$14.4bil by 2020. A significant number of fintech companies, especially those in the digital payments space, actually work alongside local banks.
Still, fintech is not to be taken lightly. Top bankers themselves are speaking of its imminent threat to their business. Former Barclays CEO Anthony Jenkins referred to it as banking’s “Uber moment” to describe technological advances that could see bank branches close down and people laid off.
Last April, Jamie Dimon the CEO of the US’ largest bank JP Morgan in his letter to shareholders warned that “Silicon Valley is coming.” “There are hundreds of start-ups with a lot of brains and money working on various alternatives to traditional banking,” Dimon wrote.
On the home front, just last month prominent banker Datuk Seri Nazir Razak echoed such views. Speaking at the Star Media Group’s PowerTalk: Business Series held at Menara Star, Nazir opined that fintech companies are disrupting banking.
“Bankers must respond to this Uber moment. People actually dislike banks today, since the global financial crisis. Recent data suggests that in the US, the cost of banking intermediation has not changed for 100 years in real terms. This simply means banks have not gotten more efficient over the years, so its right that banks get attacked by ‘Silicon Valley’, which has identified banking as an industry that is very ‘ripe’ or juicy to disrupt.”
Even the central bank is echoing these views.
In his maiden keynote address at an Islamic finance conference in Kuala Lumpur last week, Malaysia’s newly-appointed Bank Negara governor Datuk Muhammad Ibrahim gave a grim reminder to banks of the threats posed by fintech. In particular, Muhammad quoted from a report by McKinsey that 10% to 40% of banking revenue is possibly at risk by 2025 due to innovations outside banking institutions that are able to offer a significant pricing advantage and that technologically-driven applications had spread to nearly every segment of the financial sector, with the number of fintech start-ups having doubled in the last year. “Fintech is challenging the status quo of the financial industry,” he said.
To be fair, Malaysian banks are quick to point out that while fintech does represent a disruption to business, they are embracing the movement, by coming up with their own fintech innovations or by working with fintech startups.
So what is fintech?
In a nutshell, fintech is an economy of companies using technology to improve efficiencies and effectiveness in the financial services industry. To illustrate the offerings of fintech companies, consider the business model of homegrown start-up MoneyMatch, which is modelled after UK-based TransferWise which began in 2011 and today moves US$10bil a year through its platform.
MoneyMatch has created a platform to match individual buyers and sellers of currencies, with the attraction of both sides enjoying better exchange rates than what banks and even money changers offer. The rate used by the MoneyMatch site is the middle rate of the currency exchange spread. So an individual for example, willing to buy US$100 for his travels will be matched with someone wanting to change his US$100 into ringgit. The parties will be matched on this application and then proceed to make their exchange in an agreed location. MoneyMatch is also entering the area of cross border fund transfers.
“For example, someone in Singapore wishing to transfer money to Malaysia can be matched with someone here wishing to send an equal amount of money across the Causeway. Hence the parties can make the respective transfers to local accounts of their choice after an exchange of information. This means the transfer is done minus any cross-border transfer fees,” explains MoneyMatch co-founder Naysan Munusamy, who had spent many years as a forex trader with a number of banks before venturing out to start MoneyMatch.
Peer lending
One key growth area in fintech is peer to peer or P2P lending, online platforms that match borrowers with lenders, bypassing the traditional financial institutions. The business had even attracted big names such as Goldman Sachs. The most notable name in this space is Lending Club, which had launched its service as far back as 2007 and became the US’ largest technology IPO in 2014, raising around US$1bil.
Lending Club claims that its platform – which enables borrowers to get unsecured loans of US$1,000 to US$35,000 – has now helped originate close to US$16bil in loans.
Locally, last month the Securities Commission (SC) launched a regulatory framework for P2P lending, paving the way for small and medium-sized companies to access this new avenue of debt funding. Under SC’s rules though, individuals are not allowed to raise money on the local P2P platforms. Rather it is meant to only fund projects and businesses and a number of safeguards are in place. For example, those behind the operator of the P2P platform need to pass the “fit and proper” test; the rate of financing cannot be more than 18% (as that would be deemed predatory lending) and that the P2P operator has to disclose information related to the issuer and the risk assessment and credit scoring parameters adopted by the operator. There is no authorized P2P platform in Malaysia yet as parties wishing to run such platforms have to submit their application to the SC soon.
In China, P2P lending has virtually exploded. As a recent report by Citibank highlights, “China is past the tipping point”, with fintech companies having similar number of clients as the major banks. The report notes that China is the largest P2P lender in the world, with transactions topping US$66bil, compared with the US with only US$16.6bil.
Regulating fintech
But there are problems. Some unregulated P2P platforms in China had run scams. Others helped fuel an equity roller-coaster by offering funding for stock investments. This led to the Chinese benchmark index rallying more than 150% in the 12 months to last June before abruptly crashing. The Chinese authorities are now cleaning up the P2P sector.
So what are the risks of fintech regulation in Malaysia? And do companies like MoneyMatch need be regulated and licensed?
In an emailed reply to StarBizWeek, Bank Negara says: “Fintech start-ups that engage in activities under the purview of the central bank must comply with existing laws”. Bank Negara explains that regulated businesses include banking, insurance or takaful, money changing, remittance, operating a payment system or issuing payment instruments.
“A fintech company that engages in any activity that falls within the definition of a regulated business must be properly authorised to do so under the relevant laws.
“As an example, collecting deposits via a fintech platform would require approval from Bank Negara.
“A fintech company that is authorised to conduct a regulated business under the laws that Bank Negara administers will be subject to the oversight of Bank Negara pursuant to those laws.”
What this indicates is that Bank Negara is going to regulate fintechs the same way it does banks. But exactly how, it still isn’t clear.
But the good news is this: Bank Negara says it is engaging with firms in this space (and presumably that includes the likes of MoneyMatch), “to understand and where appropriate facilitate their business and provide guidance on aspects on regulation that would be applicable to them.”
Bank Negara adds that it is in the process of formulating a framework that “encourages innovation without undermining financial stability, the integrity of the financial system or the adequate protection for financial consumers.”
The SC has also been pushing for fintech innovation to develop in Malaysia. Last year, Malaysia became the first country in the region to introduce the regulatory framework for equity crowd funding. (While P2P is about companies raising debt, crowd funding is for entrepreneurs to sell equity to investors.)
The SC has also launched aFINity@SC, a fintech community aimed at industry engagement and more recently launched the P2P financing framework, which is aimed at addressing the funding needs of small businesses.
Chin Wei Min, the SC’s new head of innovation and digital strategy, says: “We think fintech can provide solutions to some of the unserved and underserved needs in the capital market.”
Chin adds: “We are also mindful of the risk, fraud and all the pitfalls. We continue to enhance our engagement model. We want to remain very close to the industry.”
Fintech’s hiccups
Some recent developments in the fintech space, however, point to weaknesses in fintech companies. LendingClub, the poster boy company for P2P lending has seen its shares tumble, wiping out about a third of its market value.
This came as it faces scrutiny after its founder and CEO resigned following an investigation into improper loan sales.
The US Treasury has released a report criticising the P2P lending business, recommending it to be more tightly regulated. Some commentators are liking P2P lending to the early days of the subprime mortgage bubble of 2006-07.
It is more likely though that the experiences of fintech in mature markets like China and the US will serve as good guides as to how this business will grow in this part of the world, with the requisite regulations put in place.
And the jury is still out as to whether traditional banks here will lose significant parts of their businesses to fintech start-ups.
Or as one industry observer puts it, fintech is more likely to usurp the business of the shadow banking market here, as some unserved borrowers now have the option to move away from loan sharks or “Ah Longs” and into the crowd funding or P2P platforms. But after that, banks could be next.
By Risen Jayaseelan, Wong Wei-Shen, and Zunaira Saieed The Star
Apr 16, 2016 ... WHO dominates the phone dominates the Internet. The whole world of
information is now available in your hand, replacing your own mind as a ...
