1. Macroeconomic indicators and current situation
In Q3 2023, the Malaysian Confidence Index (MYCI) soared to an unprecedented high of 140 points, surpassing the record of Q1 (132 points). This achievement reflects a deep strategic confidence shaped by political and economic changes.
Elections in six states where the government retains control in August 2023 highlighted the positive outlook, with the commitment to economic growth, represented by agreements between Malaysian and Chinese companies, further cementing Malaysia's position as an attractive investment destination and contributing to a surge in confidence across the country.
1.1 Geographical location and population size
Malaysia is located in Southeast Asia and consists of 13 states and three federal territories. Peninsular Malaysia has land and sea borders with Thailand and maritime borders with Singapore, Vietnam and Indonesia. East Malaysia has land and sea borders with Brunei, as well as maritime borders with the Philippines and Vietnam.
Malaysia is a multi-ethnic and multicultural country, with about half of the population being Malays, along with Chinese, Indians and indigenous peoples, with a total population of over 33 million, making it the 43rd most populous country in the world.
1.2 Economic structure and size
Malaysia is a relatively open, country-oriented, newly industrialized market economy and the 31st largest economy in the world. Since gaining independence in 1957, Malaysia has successfully diversified its economy, from an initial agriculture and commodity-based economy to a strong manufacturing and service sector that has propelled the country to become a major exporter of appliances, components, and components.
Malaysia is an exporter of natural and agricultural resources, with oil as its main export, and although Malaysia's economic structure has been moving away from manufacturing, it remains one of the world's largest producers of palm oil, and tourism is the third largest contributor to Malaysia's GDP, after the manufacturing and commodity sectors, and is the 14th most visited country in the world and the fourth most visited country in Asia. Malaysia is ranked 32nd in the Global Competitiveness Report 2022 and 36th in the Global Innovation Index 2023.
1.3 Ranked 36th in the world in terms of GDP
According to official data from the World Bank, Malaysia's gross domestic product (GDP) in 2022 was US$406.31 billion. Malaysia's GDP accounts for 0.17% of the world economy. In the world rankings, Malaysia is ranked 36th, behind Vietnam and ahead of South Africa and the Philippines.
https://tradingeconomics.com/malaysia/gdp
1.4 Ranked 56th in the world in terms of GDP per capita
From 1960 to 2022, Malaysia's GDP per capita averaged US$5215.30. In 1960, it was an all-time low of $1286.10, and the latest record for 2022 was $11371.97, which is equivalent to 90% of the world average and ranks 56th globally, just above Kazakhstan and Mexico, and below Argentina and Seychelles.
1.5 Inflation was lower than market forecasts
In November 2023, Malaysia's annual inflation rate fell to 1.5% from 1.8% in the previous month, lower than the market forecast of 1.7%. This is the lowest value since February 2021. On a monthly basis, consumer prices were flat in November after rising 0.1% in October. Malaysia's economy ministry said hyperinflation has never happened in Malaysia and the government hopes it never happens. Malaysia's highest inflation rate on record was 17.3% in 1974. Inflation that year was caused by the global crude oil price crisis.
1.6 Legal tender in Malaysia
The legal tender in Malaysia is the Malaysian Ringgit, the currency code is MYR, and the symbol is RM. Its conversion factor is represented by 6 significant digits, and the ringgit has always been internationally recognized for its stability, and as a result, Malaysian citizens are not as aggressive as Turkish or Argentine citizens are to enter the crypto asset market as a hedge against high inflation.
2. User characteristics in Malaysia
Malaysia has relatively few users compared to other popular regions, but as an important component of the Southeast Asian market, the number of cryptocurrency owners in Malaysia has continued to increase in recent years.
2.1 People are familiar with and understand cryptocurrencies
In a survey commissioned by Luno, it was noted that in Europe, people said that there was not enough knowledge and access to information to ensure that they could buy or use cryptocurrency, while in Malaysia this was not a problem, and people were quite confident and claimed to have access to enough information. As of August 2023, more than 840,000 Malaysians have signed up for the platform. Currently, the average age of Luno Malaysian customers is 34 years old, with the 30–39 age group having the highest number of investors.
2.2 The adoption rate changes significantly with the market
According to Luno Malaysia, active users grew by 33% in April 2020, while Tokenize reported a 30–40% increase in average daily trading volume in early April 2020.
According to a report by Oppotus Research Group, a specialist market research firm in Malaysia, 80% of Malaysian city dwellers are aware of cryptocurrencies, but only 21% of Malaysians claim to be truly familiar with cryptocurrency. Along with the significant rise in BTC, Malaysia's crypto adoption rate has grown significantly in Q3 2023, climbing from 26% in Q2 to 40% in Q3.
2.3 Users tend to invest more conservatively
Malaysian crypto users tend to be conservative in their investments. New users invest in crypto at once or for a fixed amount each month, while older investors with more experience opt for a safer investment strategy. Compared to non-PMEBs, PMEBs appear to be slightly more aggressive (hoping for higher returns), but they still follow a conservative investment strategy.
2.4 The attitude of users is biased towards high speculation
As the digital currency market continues to grow, the non-PMEB industry is expanding its exposure and participation in cryptocurrencies. After a slight retreat in daily trading activity that surged to 42% in the first half of 2022, trading activity has also continued to rise through 2023, suggesting that crypto holders in Malaysia are highly speculative in nature, looking for quick high yields rather than long-term investments.
3. CEX preference of Malaysian users
In Malaysia, three CEXs, Luno, SINEGY and Tokenize, have been approved by regulators, but only a small number of currencies such as BTC, ETH, XRP, LTC, SOL can be traded. In addition to this, there are other CEXs that are not on the list of Malaysian regulators that offer more trading pairs, higher liquidity, futures trading, and other features.
3.1 Bybit's most popular trading platform
In Malaysia, Bybit is the most popular CEX for users, and it is the first choice for traders and investors. With over 770 crypto assets and convenient deposit options for Malaysian Ringgit (MYR), it caters to the unique needs of Malaysian users. Bybit stands out for its user-friendly features and secure infrastructure, maintaining an impeccable track record.
In addition to its versatility, it also holds the top spot in Malaysia, offering futures contracts with up to 100x leverage and a thriving NFT marketplace that offers comprehensive trading options, cementing its position as the go-to platform for crypto enthusiasts in Malaysia.
3.2 Binance has the best market depth
Binance is a global trading platform and the second-largest cryptocurrency trading platform in Malaysia, with over 120 million users in more than 100 countries, including Malaysia. It offers a variety of features, including spot, futures, margin, options trading, staking services, and decentralized exchanges (DEXs).
It is worth mentioning that the platform offers 24-hour round-the-clock customer support in multiple languages, including Bahasa Malaysia. Its standout feature is its depth and liquidity, a unique feature that ensures smooth trading, especially for large amounts, enhancing its attractiveness to Malaysian investors.
3.3 Gate.io No KYC verification required
Gate.io is the third-ranked cryptocurrency trading platform in Malaysia and is recognized as one of the largest trading platforms globally, most importantly for deposits, withdrawals, and trading funds without identity verification for non-Malaysian users, favored by Malaysian investors looking for a KYC-free trading option.
With support for more than 1,400 cryptocurrencies, the platform is one of the most diverse, offering advanced features, including spot and margin trading, futures, staking, and lending services. The platform's intuitive interface and competitive fees are suitable for both novice and experienced traders.
3.4 Uphold is favored by users for its high yield
Uphold is recognized as the fourth-largest cryptocurrency exchange in Malaysia, with more than 250 digital assets to buy, sell, and stake on its platform regulated by the Securities Commission of Malaysia. It is worth noting that it can be deposited quickly and economically through a variety of methods such as bank transfer, debit card, Google Pay, Apple Pay and credit card.
Uphold stands out for its high NAP yields on popular crypto assets such as MATIC, SOL, and ETH, making it a top choice for investors looking for yield. What sets the platform apart is that it has audited proof of reserves, ensuring real-time data that is fully backed (1:1) by client funds for enhanced security. (Uphold is regulated and licensed by the FCA in the UK)
3.5 OKX is committed to serving institutional investors
Ranked 5th in Malaysia, OKX is committed to serving institutional investors. The platform stands out with advanced trading tools, a wide variety of cryptocurrencies, and very competitive trading fees.
OKX supports a variety of trading instruments such as futures, options, and margin trading, providing institutional clients with greater flexibility and risk management options, in addition to over-the-counter desk services. OKX's strong commitment to security, compliance, and comprehensive API services makes it the go-to choice for Malaysian institutional investors looking for a reliable and trustworthy platform. (OKX is licensed as a VASP under the SFC's new regulatory regime to conduct business in Asia)
4. Web3 projects in Malaysia
4.1 CoinGecko Cryptocurrency Data Aggregator
Founded in 2014 by TM Lee (CEO) and Bobby Ong (COO), CoinGecko's mission is to democratize access to encrypted data and provide users with actionable insights. It is a cryptocurrency data aggregator that tracks price, trading volume, social, and developer statistics. The platform provides valuable insights through cryptocurrency reports, publications, newsletters, and other channels through in-depth knowledge of the crypto space.
https://www.coingecko.com/
4.2 HB Wallet Ethereum-based consumer wallet
HB Wallet is an Ethereum-based consumer wallet designed to store Ether and ERC20 tokens. Its platform is available on Mac, Windows, iOS, and Android. It also enables users to exchange Ether for stablecoins or vice versa. Users can also purchase Bitcoin, Ethereum, Ripple, and other digital assets with a credit card.
https://www.hb-wallet.com/
4.3 RioDefi is a cross-chain wallet that provides DeFi services
RioDefi is an app-based cryptocurrency wallet. It enables users to store, pay, transfer money using cryptocurrency. It also offers RioChain, a blockchain explorer to facilitate interoperability with existing blockchains and transactions. Features of RioChain include parachain state verification, virtual machine interpreter, adaptation of consensus algorithms, etc.
https://riochain.io/
4.4 Growthbotics Conversational AI Solutions
Growthbotics provides conversational AI solutions for finance and banking. Its solutions include customer onboarding, fraud detection, anti-money laundering, intra-bank and cross-bank stablecoins, and more. Features include solutions such as facial and voice-based customer recognition, payment gateway integration, bot-based chat support, and more.
www.growthbotics.com
5. Crypto VC in Malaysia
5.1 500 Global
500 Global is a venture capital firm with $2.4 billion in assets under management focused on investing in founders who build fast-growing technology companies. They focus on markets where technology, innovation, and capital can unlock long-term value and drive economic growth. Their major investments include Canva, Solana, and Reddit.
https://500.co/
5.2 Gobi Partners
Gobi Partners is a leading Asia-focused venture capital firm with US$1.6 billion in assets under management, headquartered in Kuala Lumpur and Hong Kong. Founded in 2002, Gobi now has 15 branches, raised 17 funds, and invested in 380 start-ups. The company supports entrepreneurs from the early stage to the growth stage, with a particular focus on emerging markets. Their most high-profile investments are Animoca Brands, Liveme, and Tuniu.
https://gobi.vc/about/
5.3 Cradle Fund
Cradle provides funding and project support for the early stages of entrepreneurship, and it has been instrumental in funding more than 1,000 Malaysian tech start-ups, with one of the highest commercialization rates among Malaysian government-funded projects.
Cradle established Cradle Seed Ventures in 2015 and expanded into equity investment in 2017, demonstrating its commitment to supporting the development of Malaysia's tech ecosystem by providing financial assistance.
https://cradle.com.my/
6. Malaysia's crypto market regulatory policy
According to Cointelegraph.com, cryptocurrencies are legal in Malaysia. The Malaysian government has enacted relevant laws and regulations to ensure the stability and transparency of the cryptocurrency market. However, as an emerging market, its regulators, regulators, are still struggling to understand and keep track of the development of cryptocurrencies and take steps to protect investors from possible risks.
6.1 Licensed Platforms and Crypto Assets
SC (Securities Commission Malaysia) approved the trading of crypto assets such as BTC, ETH, AVAX, MATIC and more (Source: SC.com)
Following the publication of the revised Authorized Market Guidelines on 31 January 2019 to introduce new requirements, DAX Operator, SC has now registered three Authorized Market Operators (RMOs) to establish and operate digital asset exchanges in Malaysia. Entities not approved by the SFC, including those previously operating during the transition period, must immediately cease all activities and return all funds and assets collected from investors.
6.2 Changes in Crypto Market Regulatory Policies
In 2019, the Capital Markets and Services Order was enacted to bring cryptocurrencies (also known as digital currencies) into the regulatory scope, and cryptocurrencies are considered a type of security and subject to securities laws. However, the SFC still made it clear that digital currencies and digital tokens are neither fiat currencies nor means of payment regulated by BNM.
The 2020 Digital Asset Guidelines provide for the activities of raising funds through the issuance of digital tokens, as well as the commissioning of an initial exchange issuance platform for the safekeeping, storage, holding or custody of digital assets for others.
In 2021, the SFC amended the 2015 Approved Market Guidelines to implement new requirements for electronic platforms that facilitate digital asset trading, allowing four accredited market operators to operate in Malaysia as digital asset exchanges.
6.3 How to Taxes Cryptocurrencies
In Malaysia, cryptocurrency transactions, including the sale or use of cryptocurrencies, are generally tax-free due to the lack of capital gains tax.
However, active cryptocurrency trading or the act of classifying individuals as day traders may subject them to income tax of 3% to 30%, depending on the level of income. To be considered a day trader, one must meet certain criteria such as heavy trading, short-term holdings, high-frequency trading, efforts to increase marketability, and commercial motivation, among others. Evidence must be provided to the LHDN (Malaysian Revenue Authority) to prove that the individual is not a trader but is holding cryptocurrencies for investment purposes to avoid taxes.
6.4 Regulatory Policy Challenges and Concerns
Although Malaysia has issued corresponding guidance documents, there is still a lack of clarity and consistency in terms of regulation, which has led to more and more businesses struggling to comply with local, state and federal regulations, and many small businesses lack the necessary resources to understand the requirements for them, resulting in costly fines and even closures.
Additionally, the uncertainty surrounding which agency enforces specific rules can be confusing for business owners as they try to navigate the complex regulatory landscape. This further underscores the need for regulatory reforms to make it easier for small businesses and entrepreneurs alike to comply with existing laws and regulations.
6.5 Prospects for the future of regulatory policy
Potential developments and changes in the cryptocurrency regulatory environment in Malaysia remain uncertain. The Securities Commission of Malaysia (SCM) and Bank Negara Malaysia (BNM) have yet to issue official regulations regarding cryptocurrency trading and investment activities. Cryptocurrency exchanges are currently subject to existing anti-money laundering and counter-terrorism financing laws, as well as a number of voluntary codes of conduct developed by industry organizations such as ACCESS Malaysia.
As cryptocurrencies grow in popularity globally, both SCM and BNM are likely to have formal regulatory policies in place. These developments may restrict certain aspects of trading activity or impose new taxes on crypto transactions.
7. Summary
Malaysia's strong and diversified economy and low inflation rate make its fiat currency one of the most stable in the world, and at present, Malaysia's crypto regulatory environment is friendly, allowing the trading of approved crypto assets, but crypto exchanges must comply with the regulations of the Securities Commission of Malaysia (SC) and comply with local laws.
In terms of policy trends, Malaysia intends to establish itself as a cryptocurrency hub in Asia, challenging the centrality of Hong Kong and Singapore in the crypto space. Malaysia is steadily expanding its ecosystem of venture capital firms and web3 start-ups, with CoinGecko being a notable success story.
Malaysia's attractiveness in the crypto space is attributed to factors such as the common law court system, English proficiency, and its robust regulatory framework. Located in the Labuan region of Malaysia, Fusang is recognized for its role in the crypto industry. These key advantages, including the absence of capital gains tax on cryptocurrencies and the fact that the workforce is highly educated and predominantly English-speaking, have helped to increase Malaysia's overall attractiveness.