Weighing The Pros And Cons Of 'Adopting' Cryptocurrency

Cryptocurrency, which refers to any form of digital currency – also known as a digital asset – is increasingly gaining global attention, including in Malaysia.

This currency system is not controlled or managed by any bank or government, instead, it relies on cryptography and blockchain technology to secure transactions.

The emergence of cryptocurrencies in this century is seen as an alternative to the use of conventional currencies for transactional or investment purposes, and often regarded as safer, more transparent and immutable.

Financial technology company Triple-A, on its website, states that by 2024, cryptocurrency usage will involve 562 million individuals worldwide, compared to 420 million in 2023.

The website also said the United Arab Emirates (UAE), Singapore and Turkiye rank among the top 30 economies with the highest cryptocurrency ownership rates, while Asia remains at the forefront with 326.8 million owners, followed by North America with 72.2 million.

However, despite cryptocurrencies’ significant potential to revolutionise financial systems, investments and businesses, concerns persist with regard to their risks, more so with fraud increasingly prevalent in today’s digital era.

FRAUD

Malaysia Cyber Consumer Association (MCCA) deputy president Azrul Zafri Azmi said the global cryptocurrency market is now valued at over US$2 trillion, with Bitcoin and Ethereum – the two most popular cryptocurrencies – accounting for more than 60 percent of this value.

Malaysia Cyber Consumer Association (MCCA) deputy president Azrul Zafri Azmi.

He noted that Bitcoin’s value, for instance, rose from US$0.08 in 2010 to over US$60,000 at its peak, and as of early December 2024, its price surpassed US$100,000.

He said amid the rapid growth of cryptocurrencies, police data revealed that over 4,000 cryptocurrency-related fraud cases have been reported in Malaysia in the past five years, resulting in losses exceeding RM200 million.

“And, between 2020 and 2023, there was a 30 percent increase in cryptocurrency scam cases,” he told Bernama recently.

According to Azrul Zafri, the lack of knowledge and awareness among new users engaging with cryptocurrencies has made them susceptible to investment schemes promising unrealistic returns.

“The difficulty in tracking transactions also contributes to fraud or scams due to the anonymous and immutable nature of blockchain technology.

“This enables scammers to escape with funds without being detected. The use of unregistered platforms that offer higher returns than registered platforms further exacerbates the issue,” he said.

Among the registered Digital Asset Exchange (DAX) operators in Malaysia are MX Global Sdn Bhd, SINEGY DAX Sdn Bhd, Luno Malaysia Sdn Bhd and Tokenize Technology (M) Sdn Bhd.

He added that DAX serves as an electronic platform facilitating the trading of digital assets, allowing investors to trade approved digital assets such as Bitcoin, Ether, Ripple, Litecoin and Bitcoin Cash.

UNDERSTAND FUNDAMENTALS

The hallmarks of a typical cryptocurrency scam are promises of high returns within a short period, the pressure to invest immediately with tactics like “promotion will end soon” and the non-availability of verified information about the investment company concerned.

Cryptocurrency, which also known as a digital asset is increasingly gaining global attention, including in Malaysia.

Azrul Zafri advised users to protect themselves from fraud by choosing registered platforms and verifying the credibility of the investment company or platform.

“Refer to reliable sources to check the licensing and reputation of these platforms. Avoid Ponzi schemes or multi-level marketing setups which often require users to recruit others as new investors to earn profits.

“Users are also encouraged to use the two-factor authentication as an additional security measure to prevent unauthorised access to their accounts,” he said, adding increasing public awareness and education, particularly about the fundamentals of cryptocurrency, are key to reducing fraud.

He said cryptocurrencies are legitimate digital assets with significant potential to boost the economy and drive technological innovation, hence the onus is on users to remain vigilant and conduct thorough research before investing, and report fraudulent activities to the relevant authorities.

He added that MCCA is ready to collaborate with the Securities Commission Malaysia (SC), Bank Negara Malaysia (BNM) and the police to conduct awareness campaigns on this matter.

“Collaboration among users, the government and agencies like MCCA can create a safer and more sustainable cryptocurrency ecosystem in Malaysia,” he said.

RAPID DEVELOPMENT

Meanwhile, dean of the School of Multimedia Technology and Communication at Universiti Utara Malaysia, Associate Prof Dr Mohd Khairie Ahmad, said according to a report by Statista (a global data and business intelligence platform), Malaysia’s cryptocurrency market value for 2024 is projected to reach US$306 million.

He said in Southeast Asia, Malaysia and Singapore have been identified as countries showing rapid growth in cryptocurrency usage.

Dean of the School of Multimedia Technology and Communication at Universiti Utara Malaysia, Associate Prof Dr Mohd Khairie Ahmad.

“Next year, Malaysia is expected to have around 4.6 million cryptocurrency users. This is not surprising, considering that Internet access in Malaysia reaches over 90 percent of the population, and digital literacy, or basic ICT skills, stands at more than 75 percent,” he said, adding the Malaysia Digital Economy Blueprint, introduced by the government in 2021, has also taken note of the prospects for cryptocurrency to become increasingly popular.

Mohd Khairie said understanding the fundamentals of cryptocurrency, such as blockchain technology, types of cryptocurrencies, how the system works and their security features, is essential to ensure users are not easily deceived by digital fraud, especially manipulation tactics linked to money laundering.

“Understanding the legal framework and regulations related to cryptocurrency is also necessary as the legal ecosystem for this financial system is still being developed.

“Skills and knowledge in analysing cryptocurrency trends or patterns are also important for responsible investing, and seeking professional advice should be a priority, particularly for those looking to explore the use of this currency system,” he added.

Believing that cryptocurrency provides an alternative financial system not only for investment purposes but also for daily transactions, much like e-wallets, Mohd Khairie said its less bureaucratic nature and not being subject to global currency backing make it more stable, despite its volatility.

However, he said, its wider acceptance among Malaysians would depend on the legal framework of the currency itself.

“Currently, the governance of cryptocurrency still lacks transparency and consistency as BNM has yet to recognise it as an official form of currency for trading,” he said, adding the acceptance of cryptocurrency in Malaysia is highly influenced by the ecosystem introduced by the authorities.

BOOST FINTECH

Meanwhile, Assistant Professor at the Department of Finance, College of Business at Prince Sultan University in Riyadh, Saudi Arabia, Dr Nadisah Zakaria, said cryptocurrencies can provide access to financial services for the unbanked population, particularly in rural areas where traditional banking infrastructure is limited.

She opined that Malaysia’s status as a trade-centric nation benefits from cryptocurrencies by enabling faster and cheaper cross-border payments, reducing dependency on conventional remittance systems with high fees.

Assistant Professor at the Department of Finance, College of Business at Prince Sultan University in Riyadh, Saudi Arabia, Dr Nadisah Zakaria.

“Cryptocurrencies could offer Malaysians a new asset class, providing diversification opportunities in their investment portfolios, especially for tech-savvy younger generations.

“Besides that, small and medium enterprises, which form a significant part of Malaysia’s economy, can benefit from accepting cryptocurrencies as payment, thus reducing reliance on traditional banking and enabling easier access to global markets,” she said.

She added that cryptocurrencies can foster innovation in financial technology (fintech), potentially boosting Malaysia’s digital economy and creating new job opportunities in blockchain development, trading platforms and related services.

Touching on the risks, Nadisah said the main one is regulatory uncertainty. While BNM has issued guidelines on cryptocurrency usage, the lack of comprehensive regulations may lead to misuse, fraud or instability in the market, she said.

She also said cryptocurrencies are known for extreme price volatility, which poses significant risks for investors and could lead to financial losses for those unfamiliar with the market.

The pseudo-anonymous nature of cryptocurrencies also raises concerns about their use in money laundering, terrorism financing and other illegal activities.

“Unlike regulated financial products, cryptocurrencies do not offer recourse for consumers in cases of fraud or mismanagement by exchanges, leaving investors vulnerable,” she added.

A study conducted by Nadisah and her team in 2023 (when she was with the International University of Malaya-Wales) on ‘Fintech Adoption in Accounting: A Study of Millennials and Gen-Zs’ Readiness in Malaysia’  indicated that younger Malaysians, especially those aged 20 to 40, tend to be more aware of cryptocurrencies due to their exposure to social media, tech-savvy nature and interest in innovative investment opportunities.

Social media platforms like X, TikTok and Telegram are commonly used for crypto discussions and communities.

The study’s findings also showed that in urban areas, particularly among professionals and entrepreneurs, there is increasing awareness due to exposure to fintech developments and investment forums.

Meanwhile, rural populations tend to have lower exposure to cryptocurrency mechanisms, primarily due to limited Internet access, lower financial literacy and a lack of targeted educational initiatives.

Despite cryptocurrencies’ significant potential to revolutionise financial systems, investments and businesses, concerns persist with regard to their risks, more so with fraud increasingly prevalent in today’s digital era.

She said while many Malaysians have heard of Bitcoin or other cryptocurrencies, a significant portion lacks a deep understanding of how cryptocurrencies work and terms such as blockchain, mining and wallets.

“Cryptocurrency and blockchain-related courses are still emerging in Malaysian universities and technical institutions, leaving a gap in structured learning. Although some businesses accept cryptocurrency payments, usage for day-to-day transactions remains low due to volatility and limited merchant acceptance,” she said, adding a lack of foundational financial literacy can hinder understanding of complex cryptocurrency concepts.

Opining that the future of cryptocurrency in Malaysia holds both promise and challenges, she said with the global shift towards digital currencies and assets, Malaysia is likely to see a gradual increase in cryptocurrency adoption for payments and trading and as an alternative investment class.

“Cryptocurrencies could gain traction in Malaysia’s growing e-commerce sector as merchants adopt crypto payment systems to attract tech-savvy consumers,” she said, adding BNM and SC are likely to develop clearer and more comprehensive regulations, promoting trust and enabling wider adoption.

She said regulatory clarity may encourage institutional adoption and innovation by fintech companies.

“Malaysia’s role as a trade-centric economy and in ASEAN/Asia positions it to leverage cryptocurrency for more efficient cross-border payments and trade financing, enhancing its competitiveness in global markets, since most of the users are from this region,” she added.