By Dr Carmelo Ferlito
CEO – Center for Market Education (CME)
Voluntary Advisory Board Member – ITALCHAM Malaysia
Prime Minister Anwar Ibrahim recently advocated for the swift adoption of digital finance in Malaysia. The government is considering drafting a policy on digital finance which could see Malaysia recognising the use of cryptocurrencies and the existence of blockchain technology. While the potential benefits of digital finance must be acknowledged, caution must also be recognized against a hasty transition that could undermine the principles of currency diversity and individual privacy.
The use of both Bitcoin as a medium of exchange and store of value and the use of the so-called ‘stablecoins’ should be actively encouraged. Similarly, taxes on cryptocurrencies should be avoided. Let’s think about El Salvador, which in 2022 went one step beyond merely adding bitcoins to its balance sheet when it made Bitcoin legal tender, along with the US dollar. It actively encourages its residents to save and spend in Bitcoin, for merchants to accept it as payment, and it accepts Bitcoin as payment for taxes.
However, Bank Negara Malaysia should not serve as an active player in the future of digital finance, but rather, should welcome private innovation. As such, central bank digital currencies (CBDCs) should be emphatically rejected. Cryptocurrencies are born to challenge government’s monopoly on currency emission and therefore CBDCs are a contradiction in terms!
Furthermore, while the market must be open to cryptos as an alternative means of payment, cash should not be abandoned altogether. In fact, cash is a vital tool for the world’s poor. Many who operate within the informal economy (and outside of the banking system) do so either because they prefer to or because the banks don’t want to do business with them. Thus, cash allows them to live with some level of dignity.
Want to know more? CME produces a monthly economic bulletin that is available HERE or reach out to us for your tailor-made market report at general@centermarketedu.com.
Further considerations on the topic can be found in CME EduPaper Special Issue A Future World Monetary Order, edited by CME Research Associate Emile Phaneuf III, and available for free download HERE.
