The central bank plans to focus on guidelines related to anti-money laundering and terrorist nancing

by DASHVEENJIT KAUR / pic by AFIF ABD HALIM

Bank Negara Malaysia (BNM) plans to issue guidelines on cyrptocurrencies such as bitcoin by yearend, said governor Tan Sri Muhammad Ibrahim.

“We hope that by year-end, BNM will be able to come out with some guidelines on cryptocurrency, particularly those related to anti-money laundering and terrorist financing,” he said when met with reporters on the sidelines of the Global Symposium on Development Financial Institutions (DFIs) in Kuala Lumpur yesterday.

“We want to ensure that there is a clear guideline for those who want to participate in this particular sector,” he said.

According to the Bank for International Settlements (BIS), central banks around the world could no longer ignore the growth in cryptocurrencies.

In a report, BIS said one option for central banks might be a currency available to the public, with only the central bank able to issue units that would be directly convertible with cash and reserves.

Meanwhile, Muhammad said BNM plans to work with the leadership of local financial institutions and other stakeholders in the government to address a more focused delivery of mandates under the Malaysian DFIs.

The role of DFIs, he said, is to stimulate economic activities and subsequently attract private participation in new growth areas that would not be explored otherwise.

“We intend to work with the leadership (of Malaysian DFIs) and other stakeholders in the government in the coming months, to address a more focused delivery of mandates.

“We need to measure outcomes that matter and measure mandates that are relevant. This needs to be driven by a clear vision and strong leadership that is uncompromising,” Muhammad said.

He emphasised that more effort is required for critical assessment of the impact of Malaysian DFIs.

That includes improved corporate governance, as well as a performance measurement system that includes value-based intermediation activities on top of volume of financing provided to targeted sectors.

He explained that the critical appraisal of the outcome of DFI activities is much needed “to sharpen the development focus, redirect and amplify” the impact of financing activities by institutions.

The central bank, he said, expects local financial institutions to operate with the highest level of professionalism and integrity at all levels.

“Indeed, we expect that given their mandates, they would lead in demonstrating how commercial principles can be fully reconciled with responsible finance and public interest.”

Muhammad also emphasised key traits that would allow DFIs to promote and champion new growth areas, include a broader focus on socio-developmental goals for risk-return trade-offs to take into account positive externalities for the economy.

He called on financial institutions to have specific mandates to develop and prioritise niche segments identified to be of strategic and economic importance, which would give them legitimacy with funders and partners.

“These financial institutions also need to affiliate with the government, ministries and agencies to facilitate the design of appropriate government support — which enables them to take a higher risk.

“This includes playing a more active role in technical assistance, and serving as key repositories of specialist knowledge, resource aggregators for strategic development projects, and credible advisors to the government,” he said.

Despite development institutions around the world — including Malaysia — facing unique challenges currently, Muhammad said financial institutions still had to manage and balance responsibilities that were substantially more complex than those with narrower profit-making mandates.

“These institutions have embarked on initiatives over the last decade-and-a-half to build greater financial resilience and stronger foundations for sound management, enabling them to play an important counter-cyclical role during downturns, and to support economic activity in targeted segments,” he said.