Should Malaysians embrace cryptocurrency?
By Yugendran Kannu Sivakumaran, Research and Advocacy Analyst of Bait Al Amanah (Economics and Public Policy)
ALMOST everyone has heard about cryptocurrency over the past couple of years. Some call it a pyramid scheme while others avow that it is the next greatest technological advancement. Both sides do make some valid points.
An Oppotus report showed that in 2022, 25% of Malaysians owned crypto, which is a significant number. But this pales in comparison to a peak of 41% in 2021. Now, some people may say it is because the crypto hype is dying down, but that is far from the truth. As the markets worldwide contracted, it is reasonable to assume that people exited their positions. There are other concerns that do have merit, though, and that is regulatory pressure from governments and the number of crypto scams and deadbeat projects floating around.
Over the past three years, the US Securities and Exchange Commission (SEC) has cracked down on many cryptocurrencies, which it regards as unregulated securities. One of the biggest players caught in the net was Ripple’s XRP. Two percent of crypto holders in Malaysia own XRP, according to Oppotus. But in July, Ripple won the suit against the SEC, with the judge ruling that it did not violate federal securities law by selling its XRP token on public exchanges, setting a precedent for other cryptocurrencies.
Navigating the Crypton Terrain
People need to do research on what they invest in. An example of a deadbeat project in Malaysia was Meta Nirvana Up. One big red flag about this project was that it had no real use cases; it was just tied to a cheap-looking and buggy RPG game. One may distinguish a good crypto from a bad one by its use cases. For example, a highly acclaimed crypto, Polygon Matic, has real-life use cases, such as Starbucks using its platform to build its new web 3 NFT rewards programmes.
In addition to the scam crypto projects, the SEC has started taking action against them by charging the people involved in these projects with fraud. An example of this was when the SEC acted against famous celebrities and YouTubers who promoted Bittorrent, and Tronix.
Now, even though the crypto space views the SEC negatively, having it take out the bad apples is great for the whole space.
Malaysia’s crypto potential
As crypto awareness grows, it may be time for the Malaysian government to start taking notice of it. Countries such as El Salvador and the Central African Republic have started to see the value of crypto, having accepted bitcoin as legal tender.
Furthermore, the new technology can create with new job opportunities. Crypto exchanges have popped up in Malaysia, one of the biggest being Luno, which is one of the few regulated exchanges in the country. Luno employs 600 people, and the number could grow in the future. Worldwide, according to Finbold News, 82,200 people are employed in the crypto-related space, which is a 351% increase from 2019. And this percentage is expected to grow along with crypto adoption.
The Malaysian government has also taken an interest in blockchain technology, which is what most cryptos are based on. It has enacted a framework called the “National Blockchain Roadmap’’ for the use of blockchain in areas such as asset tracking, which includes categories such as halal tracking, and document management.
Now, people may be afraid of the technology, but it can prevent discrepancies or fraud since a block in a blockchain cannot be changed. In simple terms, economic sociologist Adam Hayes says that “a blockchain is a distributed database or ledger shared among a computer network’s nodes”. Due to sharing among computer networks and each block having its own unique ID, this means that data cannot be replicated or altered. This prevents fraud and it also means that data can always be tracked.
There are new cryptos forming that are not based on blockchain technology. Hbar, for example, is not fully decentralised like the other cryptos as it is run by a governing council of big companies, including IBM, LG, and Boeing. Hbar runs on the Hedera Hashgraph network utilising whisper technology, which is said to be faster than blockchain.
We can see that the technology is growing over time. As Malaysians, we have to embrace and adapt the technology if we do not want to be left behind. Yes, it may be scary at first, and there may be hiccups along the road, but we will learn from those and come out stronger.
This article was published on The Malaysian Insight