Some still insist it’s a fad, some buy it purely due to FOMO, while some are convinced that it’s going to completely transform the future business and finance landscape. Despite the differing views from investors across industries, one thing is for sure — cryptocurrencies have become too prominent for us to ignore.
With an increasing number of businesses and organizations investing in cryptocurrencies and accepting them as payment, it’s no surprise that these digital assets have now become more popular than ever.
If you are a newbie looking to start investing in cryptocurrencies in Malaysia, here are some of the popular cryptocurrencies you can buy, where to buy them, and some beginner-friendly tips to help you get started
Disclaimer: This article is solely to be used for informational purposes only. You should do your own analysis based on your personal circumstances before making any investment. You should take independent financial advice from a professional to research and verify any information that you find on our website that you wish to rely upon, whether for the purpose of making an investment decision or otherwise.
Table Of Contents
- What is cryptocurrency and are they legal in Malaysia?
- What approved cryptocurrencies to buy in Malaysia?
- How to decide which cryptocurrencies to buy in Malaysia?
- Where to buy cryptocurrencies in Malaysia?
- Is investing in cryptocurrency safe?
- Can I be taxed for cryptocurrency profits?
- Tips for crypto beginners
What is cryptocurrency and are they legal in Malaysia?
A cryptocurrency is a purely peer-to-peer digital currency that allows online payments to be made and received between two parties without going through a central financial institution.
The first cryptocurrency, Bitcoin, was described by its creator, Satoshi Nakamoto in 2008 as “an electronic payment system based on cryptographic proof instead of trust.” A cryptocurrency is essentially a chain of digital signatures secured by cryptography, which is recorded on a digital ledger and broadly distributed among its users’ computers via the internet.
This recording and distribution technology, called the blockchain technology, adds any new transaction that occurs in the chain to every participant’s ledger, and each “page” of this ledger is called a “block”. This system of recording information makes cryptocurrencies nearly impossible to counterfeit or double-spend.
Unlike the conventional currencies that we use today — such as the U.S. Dollar or the Malaysian Ringgit — cryptocurrencies are generally not issued and managed by any central authority, which theoretically protects their value against government interference.
Since there is no central authority to issue cryptocurrencies in general, the first transaction in a block is a special transaction that begins with a new coin owned by the creator of the block. Subsequent coins are gradually added to the circulation through the process called mining.
Mining is the process in which transactions between cryptocurrency users are verified and added to the blockchain. This verification process requires miners to solve extremely complicated computational math puzzles with highly advanced computers, which often requires a significant amount of CPU time and electricity. In return, the miner who solves complex math puzzles before the others are rewarded with new cryptocurrencies.
Hence, the process of mining not only serves as a way to introduce new coins into the existing circulating supply, but also to verify the legitimacy of each transaction and keep the cryptocurrency network trusted and secure.
So, is cryptocurrency legal in Malaysia? As at July 2021, there are a total of five approved cryptocurrencies in Malaysia. Investors can buy any of the approved crypto in Malaysia on the three registered digital asset exchanges that are recognised by Securities Commission Malaysia (SC).
What approved cryptocurrencies to buy in Malaysia?
Before you buy cryptocurrency in Malaysia, get started by understanding the basics about the five approved cryptocurrencies in Malaysia:
Bitcoin is the first cryptocurrency created, it was launched in 2009 by Satoshi Nakamoto, a pseudonym for the mysterious person or group who created it.
Explained by its creator as an electronic payment system that allows “any two willing parties to transact directly with each other without the need for a trusted third party”, Bitcoin was created as an alternative to fiat money, with the aspiration to be a peer-to-peer medium of exchange and a store of value. The bitcoin network is run and sustained based on the blockchain technology as mentioned in the earlier paragraphs.
Bitcoin is currently the most well-known and widely used cryptocurrency, with a market capitalisation of over 700 Billion (USD) when this article is written, which is over 2.5 times more than the second most used cryptocurrency, ether (ETH) by Ethereum.
The blockchain technology used by Bitcoin eventually inspired others to use the technology for more than just enabling a digital currency, but also to create applications. Founded by Vitalik Buterin and launched in 2015, Ethereum is the largest and most well-established decentralised software platform that powers it’s own cryptocurrency, Ether (ETH) and thousands of decentralised applications (dapps).
To understand dapps, let’s take a step back and look at the standard web and mobile apps that we use today, say, Facebook and Twitter. While multiple users can create accounts on these social media apps for free, the backend is still owned and controlled by a single organisation. This makes your account subject to censorship, as well as vulnerable to being hacked and to the platform’s system downtime.
Recognising these shortfalls of conventional apps, Ethereum allows decentralised applications (dapps) to be built and used without censorship, downtime, fraud, and compromise on personal information.
So how does Ether (ETH), the cryptocurrency, fit into the picture? Ether is mainly used for two purposes. Firstly, Ether is traded as digital money on exchanges in the same way as Bitcoin and other cryptocurrencies. Secondly, Ether is used on the Ethereum network to build and run applications. Dapps on Ethereum can include built-in payments using Ether, so dapp developers don’t need to spend extra time and cost to engage with third-party payment providers.
Litecoin was launched in 2011 by Charlie Lee, a former Google engineer, who introduced it as the “lite version of Bitcoin” on a popular Bitcoin forum. Also created based on the concept of decentralised digital currency, Litecoin is a peer-to-peer global payment network that is not controlled by any central authority.
Litecoin adopts a few fundamental features of Bitcoin which the founder and the team of developers thinks works well for Bitcoin, such as how it is generated, authenticated and added to the blockchain. Meanwhile, the team also made adjustments to multiple aspects that they think could make Litecoin more efficient, such as faster transaction speed and shorter mining time.
Ripple is the name of the company who launched RippleNet, a digital payment network that is run based on the blockchain technology. RippleNet comes with its own cryptocurrency, XRP. RippleNet is introduced as an innovative global payment network that makes international payment faster, cheaper and more reliable for businesses and their customers. RippleNet achieves this by using its own cryptocurrency, XRP to facilitate quick conversion between two currencies in as little as three seconds.
RippleNet is currently used by hundreds of major financial institutions including Bank of America and American Express.
Although RippleNet is built based on the blockchain concept similar to Bitcoin and many other cryptocurrencies, the XRP operates in a very different way to other cryptocurrencies. First of all, most cryptocurrencies, like Bitcoins, are released and added to the circulation when miners find them. The release of these cryptocurrencies do not follow a schedule. XRP, on the contrary, is pre-mined and released based on Ripple’s planned schedule. In December 2017, Ripple announced that it planned to release a total of one billion XRP each month over the next 55 months.
Furthermore, the Ripple Network uses a unique distributed consensus mechanism to validate transactions based on trust, which allows transactions to be validated faster and cheaper compared to other cryptocurrencies. As a result, XRP is currently one of the fastest and secure blockchains that can process 1,500 transactions per second.
Bitcoin Cash (BCH)
One of the biggest concerns surrounding Bitcoin (BTC) is that its network is slow, especially when it is compared with the transaction speed of credit card transactions that we use today. As Bitcoin gains more and more users, there are more transactions to be processed, but the fundamental blockchain technology that validates and processes these transactions remains the same, resulting in longer waiting time.
Concerned about Bitcoin (BTC)’s ability to scale effectively, some bitcoin miners suggested making the amount of data that needs to be verified in each block bigger, so that more transactions can be processed at one time. With this goal in mind, Bitcoin Cash (BCH) was created in 2017. Compared to Bitcoin (BTC)’s block size of 1MB, the Bitcoin Cash (BCH) network is now able to process transactions up to 32MB.
How to decide which cryptocurrencies to buy in Malaysia?
So what makes these cryptocurrencies different from each other, and how do these differences affect you as an investor? Let’s discuss it in terms of the four aspects below, which could also give you some ideas on what to consider when deciding which cryptocurrencies to buy in Malaysia:
1. Maximum Supply
The maximum supply of a cryptocurrency means the maximum number of coins or tokens that will ever be created. Once the number of cryptocurrency hits its maximum supply, no new coins will be mined or released again.
Some cryptocurrencies have a finite/limited supply, for example, the supply of Bitcoin (BTC) is limited to 21 million. Like Bitcoin, Bitcoin Cash (BCH) also has a maximum supply of 21 million. Meanwhile, Litecoin (LTC) has a maximum supply of 84 million, and Ripple (XRP) has a maximum supply of 100 billion. On the contrary, there are cryptocurrencies that are designed with infinite supply too, and Ethereum (ETH) is the most famous of them all.
What it means to you as an investor:
The supply of the cryptocurrency plays an important role in determining its market price. For the price of a cryptocurrency to increase, there must be a scarcity in its supply as compared to its demand. In other words, the supply must be less than the demand. For this reason, the price of cryptocurrencies with a limited supply is more likely to increase due to scarcity.
That said, this doesn’t mean that choosing a cryptocurrency with a limited supply will give you guaranteed profit; the cryptocurrency also needs to have a rising demand, along with many other factors that we will briefly discuss below. Similarly, this doesn’t mean that cryptocurrencies with infinite supply will definitely lose their value too. For instance, Ethereum (ETH) has no upper supply limit yet it is still the second-largest cryptocurrency by market capitalisation.
2. Consensus Mechanism
Since digital currencies do not have a physical form, they come with the risk of double-spending, which means the holder could potentially make a copy of the digital money and spend it twice.
Since cryptocurrencies networks are decentralised and do not have a central authority who is solely responsible for maintaining genuine records, the thousands of transactions happening over the network requires a reliable, secure, fair, efficient and real-time mechanism to make sure that all the transitions are genuine.
Consensus mechanism, also known as consensus algorithms or consensus protocols, comes in as a solution to the double-spend problem. The two most commonly used consensus mechanisms at the moment are Proof of Work (PoW) and Proof of Stake (PoS), and each of them comes with its own set of pros and cons.
Here’s how the Proof of Work (PoW) mechanism works, in simpler terms: In order for a miner (the person who validates cryptocurrencies transactions) to gain the right to add new transactions to the blockchain (the digital public ledger), the miner needs to be the first to provide proof to a math puzzle that is difficult to solve, yet can be easily verified by the network. This mechanism requires the use of sophisticated computers and a significant amount of computing time and electricity. Bitcoin (BTC), Bitcoin Cash (BCH), Litecoin (LTC), and Ethereum (ETH) use the PoW mechanism.
On the other hand, the Proof of Stake (PoS) mechanism requires users to stake their cryptocurrency to become a validator in the network. The more coins a user stake, the higher the chance the user will have to be randomly chosen as a validator. Ethereum is currently using the PoW mechanism, but the network is currently moving to use the PoS mechanism. Validators are chosen randomly to validate blocks that they don’t create, and the PoS mechanism keeps the network secure by slashing the validator’s stakes for malicious behaviour. Ethereum regards the PoS mechanism to have better energy efficiency, lower barriers to entry, stronger immunity to centralisation and high scalability compared to PoW.
What it means to you as an investor:
The type of consensus mechanism used by a cryptocurrency determines its level of security, transaction speed and scalability. Hence, before buying a certain cryptocurrency, it’s helpful for you to research what consensus mechanism that it uses, and how the pros and cons of that mechanism affect its market price.
3. Block Time & Block Rewards
Block time is the duration of time it takes for cryptocurrencies users to produce a new block in a blockchain network. As mentioned in earlier paragraphs, this is done by validating transactions that happen over the cryptocurrency network, and each time a new block is validated, a new batch of coin or token is rewarded to the miners and added to the circulation.
Each cryptocurrency network has its own block time. For example, Bitcoin’s blocktime is approximately 10 minutes, while Ethereum network’s block time is around 13 seconds. Out of all approved cryptocurrencies in Malaysia, Ripple (XRP) has the fastest block time of around 3 to 5 seconds.
The number of new coins that are rewarded to the miners with each validated block is different for every cryptocurrency network too. For instance, Bitcoin rewards its miners with 6.25 BTC per block, with the reward halving around every four years. Ethereum (ETH)’s block reward is currently 3 ETH per block. On the contrary, Ripple (XRP) works a little differently; XRP were pre-mined and are currently being released at a rate of 1 billion per month.
What it means to you as an investor:
A cryptocurrency’s block time is related to the type of consensus mechanism it uses, which along with the block rewards, could also affect its circulating supply, scalability and ultimately its market price. Therefore, these are aspects worth looking into when buying a cryptocurrency.
4. Transaction Speed
Every cryptocurrency network has a different transaction speed. Crypto networks with higher transaction speed have better ability to transfer data from one party to the other for validate transactions. A cryptocurrency’s transaction speed is determined by a few factors such as block time, block size, consensus mechanism and network traffic.
At the moment, the Bitcoin network can process a maximum of 7 transactions per second, while Ripple (XRP) is the fastest among all the five mentioned cryptocurrencies, with the ability to process 1,500 transactions per second.
What it means to you as an investor:
Imagine if you are buying something at a store, and you have two payment options to choose from: the first option allows you to make your purchase instantly, while the second option requires you to wait for 5 minutes before your payment goes through. Which payment method would you choose?
Transactions using a certain payment method need to be fast, seamless and convenient in order for the mass public to have a demand for it. The level of demand is an important factor that affects the market price and profitability of a cryptocurrency. To give you some context, Visa claim that they are able to handle a maximum of 24,000 transactions per second, while the Bitcoin blockchain can only handle a maximum of 7 transactions per second.
Again, the market price and value of a cryptocurrency is influenced by many factors, so this doesn’t mean that a cryptocurrency will definitely hold no value if it doesn’t reach a Visa-like transaction speed. However, it’s undeniable that transaction speed affects the scalability and demand for cryptocurrencies. Hence, as an investor, it helps for you to pay attention to the crypto’s blockchain software updates regarding this aspect.
For your ease of comparison, we have summarised the five approved cryptocurrencies in Malaysia based on all the aspects that we have discussed:
|Bitcoin (BTC)||Ethereum (ETH)||Litecoin (LTC)||Ripple (XRP)||Bitcoin Cash (BCH)|
|Maximum Supply||21 million||Infinite||84 million||100 billion||21 million|
|Consensus Mechanism||PoW||PoW & PoS||PoW||Consensus by Independent Validator||PoW|
|Block Time (Approx.)||10 mins||13 sec.||2.5 mins.||3 to 5 secs.||10 mins.|
|Block Rewards||6.25 per block||3 per block||12.5 per block||Pre-mined & released gradually based on schedule||6.25 per block|
|Maximum Transactions Per Second||7||20||56||1,500||116|
Where to buy cryptocurrencies in Malaysia?
“How can I buy crypto in Malaysia?” Well, the good news is, buying cryptocurrencies in Malaysia can be easily done online through multiple approved exchanges with the Malaysian Ringgit.
Generally, you create an account on the exchange, and once your account is approved, you can deposit money to your “wallet” on the exchange to buy cryptocurrencies. All of these exchanges also include detailed guides and tutorials to help beginners get started with ease.
These exchanges offer fiat-to-crypto services with different fees and changes, with the main fees being deposit fees, withdrawal fees and trade fees. Since deposit fees and withdrawal fees are pretty straightforward as their names suggest, let’s have a quick look at the trade fees chargeable for cryptocurrencies trading in Malaysia, namely maker fee and taker fee:
Maker Fee: When you create an order to buy or sell on the order book and wait for someone else to complete it, you are a maker. Some exchanges charge a maker fee while some offer 0% maker fee.
Taker Fee: On the other hand, when you complete the order created by a maker on the order book, you are a taker. Different exchanges charge different rates for taker fee.
Now that we have get the technical terms out of the way, let’s move on to discover the three digital assets exchanges approved by SC, namely:
Being the first cryptocurrency exchange that is approved by Securities Commission Malaysia, Luno is an international cryptocurrency exchange which also has a presence in Europe, Australia, Singapore, Indonesia and South Africa. Luno’s users in Malaysia get access to account features including wallet, exchange, instant buy/sell, API, along with a flexible deposit method via Interbank GIRO and FPX Instant Transfer. Luno is currently the only approved exchange in Malaysia where you can buy Bitcoin Cash (BCH).
- Cryptocurrencies Available: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Ripple (XRP), Bitcoin Cash (BCH)
- Deposit Fees: Free fiat deposit via FPX Instant Transfer and Interbank GIRO for amounts above RM100.
- Withdrawal Fees: Fiat withdrawal via Interbank GIRO at RM0.10.
- Trade Fees: Charged by tiers based on 30-day trading volume, with maker fee up to 0.25% and taker fee up to 0.50%.
SINEGY is a homegrown digital assets exchange founded in Penang in June 2017. SINEGY is currently the only approved cryptocurrencies exchange in Malaysia that offers a 0.25% maker rebate for their users. Moreover, the platform has also reduced their Bitcoin withdrawal fees from 0.20% to 0.05% since December 2020. So if you are looking to trade cryptocurrencies in Malaysia with a good deal, SINEGY is worth the consideration.
- Cryptocurrencies Available: Bitcoin (BTC), Ethereum (ETH), Ripple (XRP).
- Deposit Fees: Free for both Ringgit and cryptocurrencies deposits.
- Withdrawal Fees: RM0.10 for fiat currency withdrawal, dynamic fees for BTC and ETH withdrawal.
- Trade Fees: 0.25% reward for maker, taker fee is 0.5%.
Tokenize was approved by SC to operate as a Digital Asset Exchange (DAX) in April 2020. Offering an easy and simple to use trading interface, Tokenize is suitable for beginners to buy and sell cryptocurrencies in Malaysia with ease. It is worth noting that Tokenize is currently the only exchange out of all three exchanges that has started charging a 6% service tax (SST) on their trading fee since June 2021, which is in line with the Service Tax (Digital Services) Regulations (2020) and the Amended (Amendment 2/2020) — Service Tax (Digital Services) Regulations (2020).
- Cryptocurrencies Available: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Ripple (XRP).
- Deposit Fees: Fiat deposit is free via bank transfer, and RM0.09 via eGHL Pay.
- Withdrawal Fees: Free for fiat withdrawal, 0.1% for cryptocurrencies withdrawal with minimum fee per unit applicable.
- Trade Fees: Maker fee is 0%, taker fee is 0.8%, with 6% SST levied on the trading fees.
Thinking of giving other exchanges that are not listed here a try? Well, there are in fact quite a number of other established exchanges (but not regulated by SC) that you can explore, such as Coinbase, Binance, Kraken, Huobi, Gemini and more. However, please take note that some of these exchanges are listed on SC’s Investor Alert List, so always remember to do your own research and understand the risks before trading.
Is investing in cryptocurrency safe?
Wondering how safe is cryptocurrency investment? Like all investments, investing in cryptocurrencies comes with its own set of risks. On top of that, since cryptocurrency is a relatively new form of investment and payment network, it is extremely volatile, which means the chances of you losing your capital is very high, so keep in mind to do your own research and only invest the amount that you are comfortable with losing.
Due to the volatile nature of cryptocurrencies that leads their price to spike and drop in exaggerating scale, there has been arguments as to whether cryptocurrencies are investment or gambling.
Is cryptocurrency gambling? Well, it all depends on your approach and strategy. If one invests in cryptocurrencies without understanding the concepts and risks, and expects it to bring high profit overnight, the approach is closer to the mindset of gambling. Conversely, if you invest in a cryptocurrency with calculated risks and fundamental understanding of how it works, and you believe in its future potential, your strategy is considered to be more towards an investment.
Can I be taxed for cryptocurrency profits?
Is profit from Bitcoin and other cryptocurrencies taxable in Malaysia? It all depends on how actively you are trading it. According to the Inland Revenue Board of Malaysia (LHDN), investors who trade in cryptocurrencies actively with an intention to profit from it have to declare their profits to be taxed.
In other words, if you are simply investing in cryptocurrencies as a side hobby, you don’t have to declare your profits to be taxed. However, if you are actively trading it with a purpose to make profit, you have to declare your profit under the “any other income” section when you file your income tax.
Tips For Crypto Beginners
Feeling inspired and ready to start investing? Before you go, we have just a few more tips to help you invest safely and responsibly:
1. Invest Through Regulated Exchanges with Secured Wallets
We figure you already know this without us saying, but just in case you need a little reminder: don’t invest in cryptocurrencies that are not approved by the SC, and avoid trading on unregulated exchanges as they can be highly risky with possibility of investment scams. Also, you should keep your investment safe by adding 2FA to your wallets, which provides your wallet with an extra layer of security by requiring a one-time password every time you login.
2. “HODL” It
Ever heard of “HODL”? It is a cryptocurrency-related slang that is purposely misspelled and used to encourage cryptocurrency investors to not impulsively sell a cryptocurrency when its price drops or increases dramatically.
Indeed, as the technology revolving around cryptocurrencies is still relatively new, it could take some time for the cryptocurrency ecosystem to mature and be widely adopted by the general public. Therefore, it’s better for you to focus on the long term. Not to mention investing in cryptocurrencies are highly risky, even more so when the trader is a beginner without any expertise in cryptocurrency trading.
3. Diversify Your Investment
One of the main advantages of diversifying your investment is that it helps you to minimise your risk of loss, so that when one of your investments doesn’t perform well, you have other investments that might be gaining profit to help reduce your potential losses. This is especially important when you are planning to add something as unpredictable as cryptocurrency into your investment portfolio.
If you need more ideas on what other beginner-friendly investments are out there, check out the list of suggestions we have for you over here. At PanelPlace, we make it easier for you to discover trusted, user-friendly investment platforms to invest your money more efficiently:
With significant benefits like more seamless and secure transactions, cryptocurrencies offer huge potential in transforming the way we trade locally and globally in the future. By educating yourself about cryptocurrencies now, you are more likely to have an advantage over conventional investors if cryptocurrencies are fully adopted by the public one day. Last but not least, always remember to do your own research before you invest, and make well-informed decisions each time you trade. We’ll see you again in the next one!