Over the recent Lunar New Year holiday in China, the centuries-old practice of exchanging monetary gifts has witnessed a gradual decline as the country goes increasingly digital.
According to leading social media platform WeChat, more than 820 million electronic ‘red packets’ (or hongbao in Mandarin) have being sent over the holiday period. The tally was reached over a six-day span, and marked a 7% rise over the same period in 2018.
Rather than the typical ‘red packets’, payments are now made via smartphone apps, with electronic ‘red packets’ becoming hugely popular. Such is the extend of China’s progress towards a cashless society.
Ironically, this is a society envisaged by Prime Minister Tun Dr Mahathir Mohamad for Malaysia; a cashless system will make it difficult for certain parties to hide and give out cash bribes to anyone given that electronic transactions can be traced.
The country’s first step in this direction is through the soon-to-be-rolled-out Harapan Coin. The national cryptocurrency, so to speak, is set to be the world’s first political fundraising platform and utilises cryptocurrency and blockchain technology.
According to New Straits Times, a paperwork and presentation on the Harapan Coin has been prepared and will soon be presented to Bank Negara Malaysia (BNM) and Tun Dr Mahathir.
Currency of the Future?
Cryptocurrencies is one of the key features of decentralised network of distributed ledgers, the first of which is Bitcoin. It was born in 2008 during the Financial Crises when trust in banking and financial institutions were eroded.
The rapid rise in popularity and acceptance of Bitcoin to one of the most accepted currencies just behind the greenback and other major currencies has been phenomenal. In fact, it is only second behind the US dollar in terms of acceptability and convertibility and ahead of the Chinese yuan and Malaysian ringgit which can be quite shameful for many national currencies.
As they cut out banks, cryptocurrency makes for cheaper and quicker transactions, with the blockchain technology that buttresses cryptocurrency maintaining the integrity of payments.
But is cryptocurrency the currency of the future, or is the bubble bound to burst?
“I believe Bitcoin and other major cryptocurrencies will remain in use and will continue to exist and be popular as long as there is mistrust in the financial system,” Malaysia Investors’ Association (MIA) vice president Aaron Ting tells Smart Investor.
According to Ting, in countries that has a failing economy and is experiencing hyper-inflation such as Turkey, Venezuela, Argentina and others, Bitcoin is seen as a store of value. This is at least true comparatively to weaker currencies.
“I fully believe fiat currencies are not going to be replaced as we live in a world where we are structured according to Westphalian nation-state sovereignty.
“A logical progression will be for nation-states to issue crypto-fiat to facilitate more efficient money transfers and trade. I believe we shouldn’t waste time embracing this technological innovation as it presents a great opportunity for nation-states to study and implement much-needed innovation in our world’s finance and trade systems,” he continues.
Malaysian Crypto Scene
The year 2017, for many industry experts, was a great year for cryptocurrency investors, although this changed in 2018 following cryptocurrency market price declines.
But while cryptocurrencies may have lost some of their charm (and not to mention, hype), this does not mean that the crypto world is all doom and gloom.
“I have extremely high hopes for the new Initial Coin Offering (ICO) and Security Token Offering (STO) regulations and possibly crypto exchange regulation issued by the Securities Commission,” expresses Malaysia Investors’ Association (MIA)’s Ting.
In addition, there is also a pent-up demand in the corporate sector to tap into this new form of raising capital and funds. Above all else it also presents a unique opportunity to revamp and innovate business models into becoming more inclusive and scalable.
“With good and balanced regulation, we can create opportunities in this new industry for big and small players alike, ensure higher quality participants, increase investor protection and put in place enforcement to ensure a safe space for all parties involved,” Ting concludes.
Setting Out Regulation for Digital Assets
When it comes to cryptocurrencies, regulatory approaches have varied heavily, from China’s outright banning of cryptocurrency trading to Japan’s system of licensing crypto exchanges.
In Malaysia, the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 recently came into effect to allow the Securities Commission Malaysia (SC) to regulate digital assets as prescribed securities.
In a statement, Finance Minister Lim Guan Eng said that the offering of such instruments, comprising digital currencies and tokens, as well as its associated activities, will require authorisation from the SC and need to comply with the relevant securities laws and regulations.
“The Ministry of Finance views digital assets, as well as its underlying blockchain technologies, as having the potential to bring about innovation in both old and new industries,” revealed Lim.
“In particular, we believe digital assets have a role to play as an alternative fundraising avenue for entrepreneurs and new businesses, and an alternate asset class for investors.”
In this regard, continued Lim, the SC will put in place the relevant regulatory requirements for the issuance of initial coin offerings (ICO) and the trading of digital assets at digital asset exchanges in Malaysia.
“This framework is expected to be launched by end-Q1 2019. Any person offering an ICO or operating a digital asset exchange without SC’s approval may be punished, on conviction, with imprisonment not exceeding 10 years and fine not exceeding RM10 mil,” he concluded.