Over the past few years, Malaysia has imposed tight regulations on money transmission, remittances, and other financial operations, effectively complicating international payments and trading of foreign reserve currencies. These regulations have led to a rapid development of the Malaysian bitcoin market increasing demand for the cryptocurrency.
Malaysia has previously had weak and poor Bitcoin infrastructure and shallow bitcoin exchange markets, which made purchasing and selling bitcoin difficult for the general population. However, recently several venture capital-backed bitcoin remittance and payment services providers have debuted in Malaysia, for example, Coin.ph – here branding its branch to Coins.my.
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Rapid Development of Bitcoin Infrastructure in Malaysia
The presence of startups including Coins.my allowed both the local Malaysian population as well as expat workers to send bitcoin payments abroad with ease. Coins.my also enables users to purchase and sell bitcoin using bank ATMs and remittance outlets, and settle utility bills such as rental, electricity and water fees with bitcoin.
Over time, the demand for bitcoin has risen significantly in Malaysia, primarily due to the strict regulatory frameworks established for expat workers and foreign residents. Currently, Malaysia has a program in place called Employees Provident Fund (EPF), which forces local workers to save a portion of their monthly wages into a government-managed account.
In all, Malaysian citizens are required to forfeit nearly 12% of their monthly wages to this fund, which is operated and managed by the local authorities.
Apart from these regulations on wages, the Malaysian government also restricts the trading of the Malaysian ringgit, in hopes to prevent the devaluation of the country’s reserve currency.
On December 2, Bank of Negara Malaysia revealed that it would intervene in the onshore ringgit market, in an attempt to provide higher liquidity of the reserve currency.
“These measures are intended to promote a deeper, more transparent and well-functioning onshore FX market where genuine investors and market participants can effectively manage their market risks with greater flexibility to hedge on the onshore market. A deep and liquid onshore FX market will enable investors to better manage against volatile currency movements,” said the central bank.
The central bank also announced that exporters and fund managers cannot store more than 25% of foreign currency without specific approval from the bank.
“Resident and non-resident fund managers can now actively manage their FX exposure up to 25% of their invested assets. To qualify for this arrangement, registration with BNM would suffice.”
Rising Demand For Bitcoin
LocalBitcoins, a peer to peer bitcoin trading network, has seen a substantial increase in weekly volume, nearly reaching US$405,000 in the past week.
On the LocalBitcoins two-year weekly trading volume chart, the demand for bitcoin has never been this high since the debut of LocalBitcoins in Malaysia in 2013. The highest peak was around US$200,000 in September when the price of bitcoin was at around US$606.
As the citizens of Malaysia and expat workers become increasingly aware of the seriousness of the country’s capital controls, the demand for safe haven assets like gold or bitcoin will rise in the upcoming months.
Do you think the demand for bitcoin in Malaysia will continue to increase? let us know in the comments below.
Images courtesy of The Business Times