By Muzrifah Mohamed & Hairul Zikrie Bin Ismail
The nexus between Crypto and legal tender
Ever received a paper token from a shop in lieu of a small change, which he would accept the next time you visit him? Imagine that token digitally, and that’s your cryptocurrency. Cryptocurrency is a form of digital money that is decentralised and based on blockchain technology (Ashford, 2020), secured by cryptography, makes it next to impossible to counterfeit (The Economic Times, 2022). There are more than 5,000 different cryptocurrencies in circulation but the most popular version is Bitcoin and Ethereum. Bitcoin was the first cryptocurrency, launching in 2008, and it is still the most popular, influential, and well-known. Since then, Bitcoin and other cryptocurrencies such as Ethereum have gained in popularity as digital alternatives to government-issued money. Crypto can be bought or stored in any crypto exchanger such as Luno, Huobi Global, Binance and many more. But in Malaysia there is only one exchanger that are legalise by the Securities Commission which is Luno (Ashford, 2020).
How do cryptocurrencies work? Cryptocurrencies basically work using a technology called blockchain. They are tokens that can be used as of payment in exchange for online goods and services. They carry a predetermines store value of their own, just like any other fiat currency like the US Dollar or Ringgit Malaysia. Cryptocurrencies are digitally mined, where very sophisticated computers solve extremely complex computational mathematics problems (The Economic Times, 2022).
In this new era, cryptocurrency seems to be as one of the most popular in term of investment instruments instead of being a legal tender. However, there are some countries that have already adopt the cryptocurrency as a legal tender since the blockchain technology of cryptocurrency did not being control by any parties and fully supported by peers-to-peers system. It also being said that by using cryptocurrency system, all the transaction will be transparent. However, what is legal tender and what are the association between crypto and legal tender? Legal tender can be defined as anything recognised by law as a way of settling a public or private debt or meeting a financial obligation, such as tax payments, contracts, and legal fines or damages, is considered legal tender. Almost every country accepts the national currency as legal tender. In order to repay a debt, a creditor is legally required to accept legal tender. In order words, by law, people must accept certain coins and banknotes in payment of a debt. Some scholars believe that Malaysia should start adopt crypto as a legal tender, while others deny that this fact and believe so many aspects to be considered before the adoption (Shazana, Ning, & Philip, 2022).
Lack of awareness among Malaysian
Cryptocurrency has become a popular option for investors to boost their wealth, but a lack of understanding and education about the digital asset may limit its potential. Even though cryptocurrency is not a new thing, but not all especially from emerging countries like Malaysia, aware about how it actually works and the use of cryptocurrency. Besides, the awareness on cryptocurrency is limited to several group of people or segmentation. According to Yusof (2021), in general, people in range of 40-50 years old adult are not familiar on cryptocurrency as compared to teenagers nowadays. This is because, cryptocurrency required a proper usage of technology such as smartphone. To the new generation like youngsters, that would not be such a mess for them since they are practically using smartphone in their daily life. So, they are more exposed to the cryptocurrency through promotion made in the social media or by the crypto influencers. Apart from that, the usage of this technology for cryptocurrency purpose is important because it will ensure the safety of every cryptocurrency’s transaction made by users. So due to this problem, the awareness among people will be significantly lower since not all group of people are exposed to the cryptocurrency.
Lack of understanding and awareness on cryptocurrency will lead to many harmful effects. One of the most dangerous effects is being a victim of crypto scam scheme. When cryptocurrency suddenly being famous, there will be a group of people that are irresponsible using the name of cryptocurrency, taking advantages to people that having less knowledge on it. Usually, the victims are those that following trending in particular situation with zero knowledge of cryptocurrency. There are so many cases of crypto scam scheme that involve a large amount of money. Scammer usually will offer a scheme that are too good to be truth for the people. When they invested their money without any doubt, they will lose everything they had invested.
Government role in spreading the awareness on cryptocurrency to the Malaysian is very vital. Firstly, the government can consider to collaborate with organization that legally provide the medium of exchange for crypto such as Luno, Huobi Global, and Binance to spread the awareness and knowledge about crypto and its benefits in the future. By doing this, the Malaysian are more exposed about what is actually cryptocurrency. Campaign or educational talk can be made in any venue that are convenient and easy to be accessed by the people. To exposed the cryptocurrency at the earlier stage, government also can organize the campaign and educational talk at the secondary school or local universities. With this effort, the awareness on cryptocurrency will increase and the Malaysian be more knowledgeable about this (Yusof, 2021)
Cryptocurrency Mining Legality in Malaysia
The cryptocurrency mining legality issue is one of the most popular issues when it comes to cryptocurrency. Every year we can see the news about the authorities and the Tenaga National Berhad (TNB) side arresting people who is illegally mining the cryptocurrency. The government views electricity theft through illegal bitcoin mining activities seriously as it has recorded a 400% increase over the past four years. This had resulted in an estimated loss of more than RM2.3 billion. Mining cryptocurrency is not illegal but the act of stealing the electricity to mine the cryptocurrency is the one that is illegal. Some of irresponsible people that want an easy money will steal the electricity to mine the cryptocurrency so that they will not have to pay for the electricity bill and gain more income from it. Since mining required a lot of electricity usage, they decided to steal the electricity illegally (Ashford, 2020).
The act of stealing the electricity to mine cryptocurrency will lead to more arrested miners by the authorities and TNB. This eventually give a negative impact where the Malaysian perspective on cryptocurrency will change. As explained earlier, mining cryptocurrency is not an illegal act. People will though that mining cryptocurrency is an illegal act when there is many arresting made by the authorities. This will lead the people feel scared and discourage them to learn and involve in the cryptocurrency although the advantages of it outweigh the drawbacks. It also will make the government effort to adopt cryptocurrency as legal tender become harder since the people are not exposed to the cryptocurrency and they felt that involve in the cryptocurrency is one of criminal act. Other than that, the increase in cases is a worrying trend as it affects not only the energy industry in terms of value, but also the stability of the electricity supply system and public safety. Extreme use of high-powered cryptocurrency mining machines, 24 hours non-stop, could cause short circuits due to the use of non-standard fuses and loads exceeding cable capacity, with the risk of fires.
The most relevant solution to solve the issue of stealing electricity to mine cryptocurrency is the government and authorities should establish a proper framework to be comply by the miner. TNB can proposed a special tariff for cryptocurrency mining operators in a move to fight electricity theft. The Energy Commission also can promote and encourage Bitcoin mining operators to apply for legal electricity supply (Ashford, 2020). With all these approaches, the cryptocurrency miner can mine legally without being arrested by the authorities. If the miners still doing the act of stealing the electricity to mine, even though there are a legal framework that have been set up by the government, the authorities and TNB side should finding ways to combat this illegal act. TNB might consider to have a round-table discussion with the Malaysia’s anti-graft agency, the police, the Energy Commission and the local councils to start working on this issue.
To sum up, despite advancements since their inception, cryptocurrencies rouse both ire and admiration from the public. The challenge proponents must solve for is advancing the technology to its full potential while building the public confidence necessary for mainstream adoption. After all, critics are not entirely wrong. Clearly, there’s a lot of hype surrounding the space. New cryptocurrency advancements are often accompanied by a slew of risks: theft of cryptocurrency wallets is on the rise, and fraud continues to cast an ominous shadow on the industry. As emphasized by Mazer (2017), this tension between promise and peril makes this new world unlike anything we’ve experienced before. Still, cryptocurrencies could be truly transformative. Imagine where the purchase and sale of real estate no longer requires signed documents or an official “closing”—just the transfer of a cryptocurrency backed by a smart contract. The only limit is your imagination.
From Malaysia context, I personally view that Malaysia is not ready yet to adopt the cryptocurrency as legal tender due to various reasons and two of the reasons has been discussed above. However, for a long run, recognizing cryptocurrency as a legal tender seems to be one of the best initiatives that can be urge by the government in the future in order to make Malaysia as one of the most competitive markets in the world.
Ashford, K. (2020, November 20). What Is Cryptocurrency? Forbes Advisor. https://www.forbes.com/advisor/investing/cryptocurrency/what-is-cryptocurrency/March 06, Y. N. / B., & Am +08, 2022 11:00. (2022, March 6). How TNB is trying to stop illegal Bitcoin mining. The Edge Markets. https://www.theedgemarkets.com/article/how-tnb-trying-stop-illegal-bitcoin mining#:~:text=In%20Malaysia%2C%20crypto%20mining%20itself.
Shazana. M., W. Ning, Philip. S. (2022) Morning Brief: Should Malaysia Adopt Crypto As Legal Tender? BFM 89.9. Retrieved April 29, 2022, from https://www.bfm.my/podcast/morning-run/morning-brief/should-malaysia-adopt-crypto-as-legal-tender.
Mazer, J. (2017). Demystifying Cryptocurrencies, Blockchain, and ICOs. Toptal Finance Blog. https://www.toptal.com/finance/market-research-analysts/cryptocurrency-market.
The Economic Times. Crypro corner. Retrieved on 9 November 2022 from https://economictimes.indiatimes.com/markets/cryptocurrency.
Yusof, A. (2021, July 17). Call to boost cryptocurrency awareness | New Straits Times. NST Online. https://www.nst.com.my/business/2021/07/709197/call-boost-cryptocurrency-awareness.