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Malaysian SC Shariah Advisory Council praises crypto’s ‘great potential’

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Just three months after a landmark decision declaring digital assets trading is permissible under Islamic law, and religious scholars in Malaysia say crypto is looking bullish as an investment.

The Malaysian Reserve reported Dr. Modh Daud Bakar, the Securities Commission Malaysia (SC) Shariah Advisory Council chairman, as saying that crypto has great potential but adoption in the country faced challenges from a lack of understanding about the asset class.

Speaking at the SCxSC Fintech Conference 2020 in Kuala Lumpur on Oct. 6, he said that only 2% of Malaysians have any knowledge about cryptocurrencies. Bakar said because crypto was not considered legal tender under religious law, it can be treated as a commodity, provided it isn’t backed by “ribawi items” — substances that must be exchanged in equal measure like gold and silver.

“It is a medium of exchange, and we cannot stop people [from using] commodities as medium of exchange. It is as good as buying an e-ticket or commodities in the market.”

“[The acceptance of digital assets] can open up so many interesting areas in Malaysia, in which crypto can be deemed as investment assets where people can buy and hold for trading,” said Bakar. “The potential of this currency is as great as it comes with a growing digital economy of the world.”

The question of whether crypto is allowed according to Islam is still being debated, but in 2018 an advisor to an Indonesian FinTech firm declared that Bitcoin was “generally permissible” under Sharia law. Prior to that ruling, the firm’s CEO Matthew Martin told Cointelegraph that crypto was more likely to be permissible under Islamic law than fiat, due to it being based on Proof-of-Work, rather than debt.

Shariah Advisory Councils are typically the authority that oversee the implementation of Islamic laws in the operation of Islamic Financial Institutions. In July, Malaysia’s council declared that digital assets trading was permissible according to Shariah Law.

“This has opened opportunities to take advantage of cryptos as a commodity or as an investment in a company,” Bakar said.

As more than 60% of people in the country practice Islam, crypto firms have the opportunity to welcome more Muslim traders into the digital asset space. The country currently has three licensed exchanges including Luno Malaysia, Tokenize Malaysia, and Sinegy Technologies. Binance currently does not have authorization to operate in the country, but supports the Malaysian Ringgit.



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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.