Legally Speaking: Global currencies – the future of payments?

For digital currencies to be considered payment instruments in the Malaysian framework, they would need to comply with the Financial Service Act 2013. - Reuterspixrecently announced it was granted a first-of-its-kind conditional “Bitlicense” by the New York State Department of Financial Services, allowing them to facilitate the holding and trading of cryptocurrencies on PayPal digital wallets, and their use as a funding source with US merchants.

Other emerging digital currencies like stablecoins and central bank digital currencies operate on different mechanics. As a value proposition, these newer global currencies promise to decrease payments transaction friction, lower volatility, and increase financial inclusion. But because their characteristics are different, their fit in Malaysia’s regulatory digital currencies framework is unclear. This article briefly explores the different digital currencies and laws that apply.

► provide a return in any form, from the trading, conversion or redemption of the digital currency or the appreciation in its value; and 0 not be issued or guaranteed by any government body or central bank. CBDCs are blockchain-based digital representations of value issued by governments . Whilst their designs are still being finalised, CBDCs may not have decentralised ledgers, and will be issued and guaranteed by governments or central banks. These characteristics are inconsistent with the 2019 Order, reducing the likelihood they will be considered securities, or even digital currencies.

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