KUALA LUMPUR: US President-elect Donald Trump's push to make the United States the cryptocurrency capital of the world may spur regulators across regions to jump on the bandwagon, experts say.
SPI Asset Management managing partner Stephen Innes told Business Times that US' moves under Trump could strengthen crypto guidelines and promote the growth of a dynamic digital asset market.
"This American-led overhaul could spark a global regulatory alignment, or perhaps a high-stakes race among nations vying to become the planet's preferred crypto haven.
"Imagine a world where consistency, U.S.-inspired regulations elevate investor confidence to new heights, drawing both institutional behemoths and retail investors who had been sidelined by regulatory fog.
"However, the crypto cosmos remains a theater of high drama and volatility. Investors should tread carefully; the regulatory winds can shift rapidly, and the interconnectedness of a U.S.-centric crypto world amplifies systemic risks," he said.
Innes said that a glitch in a major American exchange could have widespread global repercussions.
He stated that cyber threats, custody challenges, and the unpredictability of political shifts remain constant risks.
"As the U.S. charts a course toward becoming a crypto powerhouse, it promises a frontier of wealth and innovation but also demands a vigilant, informed approach from investors navigating this transformative yet turbulent domain," the economist said.
Luno general manager for Asia Pacific Aaron Tang said the incoming President-elect Donald Trump's administration's recent appointment of David Sacks as the White House Lead for artificial intelligence (AI) and Crypto lends further weight to its ambitions to make the U.S. the "crypto capital" of the planet.
"Many countries look towards the U.S. regarding regulatory policies, so this is another step towards a mature crypto landscape with guardrails for adoption.
"That said, it would be difficult for countries to readily mirror their policies until there is clarity on what U.S. policies entail. I don't foresee countries immediately mirroring U.S. policies, given that crypto regulation is already active in many countries around the world," he added.
Aaron noted that Malaysian regulators remain updated on current developments, though their response to any changes in the U.S. would ultimately be a matter for the regulators to address directly.
"It is important to note that Malaysia has long had progressive crypto regulations — evidenced by the first digital asset exchange approvals which were given out 5 years ago in 2019."This milestone was achieved way earlier than many advanced countries, such as Singapore," he said.
Aaron pointed out that recent market trends have driven a remarkable increase in first-time customers downloading their app and making their initial cryptocurrency investments.
He emphasised that while investment fundamentals remain unchanged, cryptocurrency is considered a higher-risk asset, requiring investors to carefully balance potential risks and rewards.
"It is more accurate to say that crypto is affected by global macroeconomic factors than just the U.S. alone."Of course, U.S. policies play a big part in overall macroeconomic factors; however, investors should not consider only one factor when making investing decisions," he adds.
Regulator's role and response
Bank Negara Malaysia (BNM) does not recognise cryptoassets are not legal tender in Malaysia and it is not a regulated payment instrument by BNM.
Accordingly, digital asset businesses are not subject to prudential
and market conduct standards applicable to financial institutions regulated by BNM.
Notwithstanding, BNM and the Securities Commission (SC) continues to ensure cryptoasset activities comply with relevant laws and regulations under the purview of both regulators [e.g., foreign exchange policies (FEP) and Anti-Money Laundering and countering the financing of Terrorism (AML/CFT) regulations]. After the Capital Markets and Services (Digital Currency and Digital Token) Order 2019 took effect on Jan 15, 2019, and the subsequent revised Guidelines on Recognised Markets were issued on Jan 31, 2019, the Securities Commission (SC) has registered six companies as Recognised Market Operators (RMOs) to run digital asset exchanges in Malaysia.
The regulations for digital assets are in place in Malaysia, with the SC regulating the trading, issuance, and safekeeping of digital assets in the country.
According to SC's guidelines on digital assets, it has the authority to vary, add or remove any requirements or conditions on an issuer (body corporate that seeks to raise funds through a digital token offering), based on the nature of its operations and the risks it poses.
It can also issue a direction to the issuer, its board, directors, senior management, or any other relevant person if the SC is satisfied that it is necessary for the purposes of ensuring fair and orderly markets, including the protection of the token holders or in the public interest.
This includes if the SC is of the opinion that the initial exchange offering (IEO) project is no longer viable or sustainable.
The guideline also included that an IEO operator must have a minimum paid-up capital of RM5 million.
In an e-mail response to Business Times, BNM said the central bank, along with SC, will continue to ensure that cryptoasset activities adhere to applicable laws and regulations under their jurisdiction, including foreign exchange policies (FEP) and Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regulations.
"Overall, the cryptoasset market in Malaysia remains small relative to the domestic financial market, with limited interlinkages between these two markets."BNM will continue to proactively monitor developments in the digital asset space and assess potential risks posed to the financial system," it stated.
BNM said within the broader digital asset space, there has also been increased focus on the potential for the underlying blockchain technology to drive innovation and efficiencies in the regulated financial sector.
It specifically noted that asset tokenisation has emerged as a significant focus area.
"In line with global regulators, BNM is exploring the potential for asset tokenisation use cases for financial services, together with the SC and the financial industry," BNM added.
Asset tokenisation in financial services refers to the process of converting real-world assets (such as real estate, stocks, bonds, or commodities) into digital tokens on a blockchain.
These tokens represent ownership or a share of the underlying asset.
Bursa Malaysia Securities Bhd when reached by Business Times, reiterated its decision not to include cryptocurrency-related products in its multi-asset exchange, highlighting its focus on investments backed by tangible assets and fundamental value to support balanced risk and reward for investors.