Forex trading has boomed in popularity over recent years, with access to smartphones giving everyone access to brokers. However, before starting out in forex, it’s essential to understand local legislation and follow necessary laws. Throughout this article, we will discuss the legality of forex trading in Malaysia and tell you how to trade compliantly.
Malaysian Law and Regulation
Foreign currency trading is completely legal in Malaysia, but you need to ensure that you operate from a commercial licenses bank account, an investment bank, or Islamic bank (domestic and international). Three primary pieces of legislation govern forex trading in Malaysia:
- The Security Commission Act 1993. This act grants the Securities Commission Malaysia the power to regulate businesses.
- The Money Changing Act 1998. This act provides businesses with the regulation and licensing in regard to money changing.
- The Exchange Control Act 1953. This act outlines any restrictions related to foreign exchange and applies to non-residents and residents.
Regulatory Bodies in Malaysia
Regulatory bodies are primarily made up of banks and institutions and are responsible for layout out the rules for a particular country.
- Malaysian Investment Development Authority (MIDA). This is the primary forex agency of the Malaysian government and helps to influence investments towards manufacturing. Further, MIDA is responsible for creating the code of conduct for business etiquette in Malaysia.
- Finance Accreditation Agency (FAA). The FAA aim to increase the standards of certification within the finance industry, and it’s governed by the Bank Negara Malaysia.
- Bank Negara Malaysia. Created in 1959, this is the central bank in Malaysia, and its main function is to dispense currency and advise the government.
- Shariah Advisory Council (SAC). Under the supervision of Bank Negara Malaysia, SAC is responsible for overseeing business banking under Islamic law.
- Securities Commission of Malaysia (SC). If a business deals with security, SC Malaysia is responsible for all regulatory functions.
How to Stay Legal
Trading in foreign currencies is legal in Malaysia, but it’s essential to follow the regulations set out by Bank Negara Malaysia. If you wish to trade forex in Malaysia, you will need to use an approved broker, which will be licenced by one of the regulators discussed above. Further, your bank account will need to remain Islamic, which means it must be Shariah-compliant. There are plenty of legitimate brokers out there, but it’s important that you compare each one before making a commitment.
Is Forex Taxable Revenue in Malaysia?
When there is money, the tax man usually isn’t far behind, which is why you need to know about forex taxation in Malaysia. If you make a regular profit from forex in Malaysia, this money will be subject to tax. However, if you have capital gains from forex, you won’t need to pay tax.
Forex trading is completely legal in Malaysia, but you need to ensure you follow the rules laid down by the regulatory bodies discussed above. When choosing an online broker, make sure that it follows Islamic law. Further, your bank account needs to be Shariah-compliant.
