KUALA LUMPUR: The central bank has commenced work on a regulatory structure for digital currencies which will stem any emerging risk of terrorism financing.
Bank Negara Malaysia governor Tan Sri Muhammad Ibrahim said starting 2018, entities converting crypto currencies into fiat money currencies will be regulated.
The Anti-Money Laundering, Anti-Terrorism Financing ad Proceeds of Unlawful Activities Act 2001 will govern those converting crypto currencies into cash.
"This is to prevent the abuse of the system for criminal and unlawful activities and ensuring the stability and integrity of the financial system," he said at the Third Counter-terrorism Financing Summit 2017.
BNM is also finalising the details of a new requirement for the banking and money services business sector to report remittances in high risk areas.
Muhammad said digital currencies mark the beginning of a new era in the financial sector and its role of the financial sector as a bulwark against terrorists' financing becomes more critical.
He suggested a three-pronged defence strategy within the financial system – capitalising on technology, promoting 'clever partnership' between the authorities and industry and closer international cooperation.
The adoption of artificial intelligence, machine learning and big data technology are imperative tools as suspicious transactions become more complex and harder to detect.
Regulators cannot be oblivious to these developments.
"We need to prepare ourselves as digital currencies becomes the new norm, according to many pundits."
Early 2017, BNM facilitated information sharing platform between law enforcement agencies and selected financial institutions to swiftly and effectively mitigate risks and respond to threats.
The four-day summit is being jointly hosted with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and Pusat Pelaporan dan Analisis Transaksi Keuangan (PPATK) Indonesia.