Population: 32 million

Wealth in domestic bank deposits: 527 billion USD (November 2023)

Offshore expatriated wealth: 23.6 billion USD

Main offshore banking locations: N/A

Number of individual brokerage accounts: 600,000 (2023)

Crypto adoption (% of population): 1 million (3%)

TLDR

Malaysia has strict foreign exchange controls but allows residents flexibility in foreign investments. Non-residents face few restrictions in bringing in capital. Cryptocurrencies are legal but tightly regulated by the Securities Commission. Foreign securities can be offered subject to Malaysian regulations and investor protections. Sophisticated investor categories are defined based on asset thresholds starting at RM1 million.

Exchange controls

Malaysia has stringent foreign exchange controls governed primarily by the Central Bank of Malaysia (Bank Negara Malaysia or BNM) under the Exchange Control Act 1953 and the Foreign Exchange Administration Rules. BNM issues Foreign Exchange Notices and regulations that dictate how residents and non-residents can conduct foreign currency transactions and conversions. While residents have reasonable flexibility in making foreign investments and maintaining foreign currency accounts domestically, non-residents face minimal restrictions in bringing foreign capital into Malaysia or repatriating their funds abroad. Property investments above RM20 million require approval from the Economic Planning Unit.

Distribution rules for foreign investment products

Foreign securities can be offered in Malaysia provided they adhere to guidelines instituted by the Securities Commission Malaysia (SCM) as well as legislation such as the Capital Markets and Services Act. Offer documents must comply with stipulated Malaysian disclosure requirements and provide local investors protections on par with domestic funds. The Malaysian government has implemented regulations intended to attract foreign investment by removing impediments to foreign securities distribution. However, the explicit rules regarding the direct sale of foreign securities to Malaysian citizens remain unclear, potentially necessitating legal consultation.

Qualified investors

The Securities Commission Malaysia (SCM) has defined several sophisticated investor categories with differentiated requirements:

• Accredited Investors: This category includes licensed financial institutions, fund managers, exchanges, high net worth individuals, closed-end funds, and directors of the aforementioned entities.
• High Net Worth Entities: Trust companies, public companies, corporations, partnerships and statutory bodies with total net assets exceeding RM10 million.
• High Net Worth Individuals: Individuals with minimum RM3 million in net personal assets or RM300,000 gross annual income. Those with RM1 million in net investment assets also qualify.
• Retail Investors: Considered nonsophisticated investors, they can participate in offerings allowed for accredited investors by “opting up” through a statutory declaration.
• Angel Investors: Individuals certified by SCM with investment experience who provide capital to early-stage businesses. Different regulations compared to other categories.

All qualified investors have higher investment limits and can participate in more complex offerings excluded from retail investors. However, minimum disclosure documents must still be provided. SCM regularly reviews the threshold criteria to ensure appropriate investor protection.

Cryptocurrency regulation

While cryptocurrencies are legal in Malaysia, they are not recognized as legal tender. Cryptocurrencies are classified as securities and governed by the Securities Commission Malaysia (SCM), which has instituted stringent regulations pertaining to initial coin offerings (ICOs), crypto exchanges, anti-money laundering (AML), and the Crypto Travel Rule. As a result, major global crypto players are restricted from directly operating in Malaysia, while local regulated exchanges that comply with SCM guidelines are permitted. Taxation of cryptocurrency activities is still developing, with no capital gains tax yet but potential income tax obligations. The SCM frequently updates its crystallizing guidelines regarding digital assets to maintain an optimal balance between encouraging innovation and mitigating risks.