With an internet penetration rate of 80%, Malaysia has the best internet connectivity in Southeast Asia (SEA) and is the fifth-best connected in the world. Coupled with a mobile penetration rate of 125%, and it’s clear why Malaysia’s Minister of Finance had in November 2018 expressed his belief that the country can leverage digital technologies such as blockchain to “roar again as a proud Asian Tiger”.
As 2019 ends, Malaysians have a lot to look forward to on the blockchain and crypto fronts, as the country embraces the new year with its Vision 2020 national development agenda.
As an integral part of Malaysia’s digital economy, the domestic blockchain industry will have welcomed the various digital initiatives and incentives included in the 2020 national budget. Firstly, there is US$120 million worth of subsidies for companies that invest in automation. Under the subsidy scheme, each company is entitled to receive matching grants capped at US$500,000 from the Malaysian government. This certainly bodes well for the blockchain industry in the country, since the technology does feature process automation via smart contracts.
Additionally, the Malaysian government has also allocated US$6 million of the 2020 national budget for the provision of contestable matching grants to support pilot programs involving digital applications that use nascent technologies, such as blockchain.
With generous financial support from the public sector, Malaysia’s blockchain industry is primed for growth in 2020.
Although Singapore is renowned as a global and regional financial hub, PwC’s November 2019 report, “Virtual Banking: Malaysian Customers Take Charge,” indicates that Malaysians have an edge over their Singaporean neighbors when it comes to digital banking. Based on the report, Malaysians have a 79% awareness of digital banks, compared to 74% among Singaporeans. Malaysians are also more interested in engaging digital banking services, with 74% of Malaysians expressing interest compared to 61% of Singaporeans. Furthermore, Malaysians are also more willing to trust digital banks than Singaporeans, with 64% open to the idea of sharing their data with digital banks, versus 55% in Singapore.
Given the widespread awareness and interest in digital banking among Malaysians, it is little surprise that Bank Negara Malaysia (BNM) is in the process of establishing a national digital banking framework. As of June 2019, the central bank signaled 50% readiness, with 10 market players reportedly expressing interest in establishing digital banks in the country.
Once completed, the digital banking framework would further support Malaysia’s booming financial technology (FinTech) sector, which already constitutes 40% of the country’s payments industry. There are over 240 FinTech companies and 48 e-wallet providers operating in Malaysia as of June 2019.
In the year ahead, Malaysians can look forward to engaging in digital banking services. During the tabling of the 2020 national budget in October 2019, the Finance Minister had announced that the application window for digital banking licenses would be open by the first half of 2020.
On the crypto front, Malaysia has seen a host of regulatory developments in 2019, including the enactment of the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019. The Order prescribed certain categories of digital tokens and digital currencies as securities for the purposes of the Capital Markets and Services Act (CMSA) as well as the revision of the Malaysian Securities Commission (SC)’s Guidelines on Recognized Markets to include an additional chapter to provide for the eligibility requirements and compliance obligations of digital asset exchange (DAX) operators. In November 2019, Luno Malaysia became the first fully-licensed Recognised Market Operator (DAX) in the country after it obtained the SC’s unconditional approval for its operations.
In 2020, the regulatory focus is likely to shift from crypto exchange operators to Initial Coin Offering (ICO) issuers, as the SC’s ICO regulations — initially slated to be issued by the second half of 2019 — have been delayed, but are expected to be ready within 2020. Barring any unforeseen changes, Malaysians can look forward to taking part in the first regulated ICO in the country this year.
All in all, things are looking up for Malaysia’s crypto industry in 2020. As Luno Malaysia puts it, 2020 will be the year when cryptocurrencies finally come of age.
With firm governmental support and well-developed technological infrastructure, coupled with strong interest among its digitally savvy population, Malaysia’s blockchain and crypto industries look set to lead the region in 2020. This year may prove to be a watershed moment in Malaysia’s development for it to “roar again as a proud Asian Tiger.”
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