If you are reading this, then likely you are a Malaysian cryptocurrency enthusiast like myself, and as enthusiasts are apt to do, from time to time we indulge in dreams where cryptocurrencies have taken over the world.
The promise of cryptocurrencies is as compelling now, as it was when I first heard of them in 2011; anyone should be able to conduct commerce with anyone else, on anything, anywhere, at an affordable cost, without unwarranted delays, restrictions, uncertainty or surveillance. The promise is both refreshingly liberating and uncomfortably scary, as it should be, otherwise it will have nowhere near its current disruptive potential.
The rational part of us maintains our involvement with cryptocurrencies as experimental; a front row seat to witness the impact brought about by one of the greatest innovations of our time. The irrational part of us secretly hopes our modest bet today will bring great wealth and freedom in the future. Both are justified, and both require work.
Let's be honest, the current Malaysian status quo is not as accommodating to cryptocurrencies as we would like. Only a small fraction of our society understand what they are, much less own and regularly transact with them.
Propagating something meant to function as "Money" requires a confluence of factors to induce a self-fulfilling, positive feedback loop. “Money” is a network effect produced by accumulating social confidence after all, and concentrating on the technology while missing the legal and the psychological is ignoring important pieces of the puzzle.
When I say "a mature Malaysian cryptocurrency ecosystem", here is what I mean:-
1. Any Malaysian individual can procure, store, spend and trade cryptocurrencies seamlessly without restrictions, or fear of legal repercussion.
2. Any Malaysian business can quote prices in, store, receive and spend cryptocurrencies seamlessly without restrictions or fear of legal repercussion.
3. Cryptocurrencies are legally treated in its own unique category; the buying & selling of which do not attract any value-added tax, the transmission of which are exempt from any money service or exchange control laws, and the lending and borrowing of which are exempt from any banking laws. In other words, the purview of the Malaysian government shall encompass the Ringgit and extend to the interface between the Ringgit and cryptocurrencies, but no further.
4. There exist cheap, diverse, widespread, localized POS / ERP solutions that allows cryptocurrency integration into business processes. Local accounting and auditing firms are able to verify ownership and mark-to-market the value of cryptocurrency holdings in corporate balance sheets.
5. There exist a healthy number of well-capitalized, professionally-managed, prudently regulated local cryptocurrency wallet / exchange / merchant service providers.
6. There exist a healthy number of well-incentivised, prudently-regulated individual / merchant acquirers that on-boards new users into the ecosystem.
7. There exist a robust and technologically-adept government executive and judicial branches to educate, regulate, enforce and resolve disputes related to cryptocurrencies, as far as it is reasonably practicable for them to do so. Dealings in cryptocurrencies shall by-and-large remain caveat-emptor and laissez-faire indefinitely.
I believe it is important that we produce a mature Malaysian cryptocurrency ecosystem, as surely similar measures are being pursued by other competing societies. Cryptocurrencies may be fringe now, but they herald the era where barriers in time and cost to capital flows are miniscule. If we do not consciously make it attractive for capital to remain and circulate within our own economy, then it will just migrate elsewhere overnight.
Imagine if half your salary is paid in Ringgit and the other half is paid in cryptocurrencies. Your Ringgit holdings enter our local financial system and end up in Ringgit-denominated loans such as mortgages and credit cards. Your cryptocurrency holdings on the other hand are kept private; unusable by anyone else.
Now imagine if it is trivial for you (and everyone else) to convert between the two holdings; instinctively you would maintain the one that provides the highest risk-adjusted returns. Unless our local financial system can provide something superior, it may progressively be starved of capital.
That being said, I do not believe the Ringgit will be upended by cryptocurrencies any time soon. Local taxes will always be paid in Ringgit after all, and there are inherent advantages in sovereign fiat (stability, enforceability) that ensures its preference in certain applications. The difference between the coming and the current paradigms is that for the first time, the Ringgit will have to compete for usage.
Ideal conditions for adoption of cryptocurrencies in Malaysia will not just spontaneously emerge while we wait in silence, and the community must be willing and able to manufacture this outcome proactively. The challenge is to figure out a rational, logical progression to do so, and coordinating our efforts to maximize traction within a reasonable timeframe.
In this series of posts, I will try to elucidate steps required to produce a mature Malaysian cryptocurrency ecosystem over the medium term. Your feedback is most welcomed, and these posts will be regularly updated as new facts are discovered and action points are refined.