Malaysia Cracks Down on Bybit: Crypto Exchange Ordered to Cease Operations

The Securities Commission Malaysia (SC) has ramped up its regulatory actions, directing Bybit Technology Ltd to shut down its website and mobile applications in the country. This move comes after the crypto exchange was found to be operating without proper registration under Malaysian law.

Bybit’s Compliance Failure: What Went Wrong?

Bybit, once known as Bybit Fintech Ltd, and its CEO Ben Zhou have been reprimanded for violating the Malaysian Securities Laws. According to a report from The Edge Malaysia, Bybit has faced enforcement actions for operating without the necessary licenses. While the platform has complied with previous directives, the SC’s latest decision signals mounting regulatory pressure on cryptocurrency exchanges operating in the region.

The SC has emphasized the importance of operating in compliance with Malaysian laws, and Bybit’s failure to meet registration requirements has resulted in its removal from the market. The decision also sends a strong message to other crypto exchanges operating in the country without official approval.

The SC’s Warning: Unregistered Entities Put Investors at Risk

The Securities Commission Malaysia has issued a stark warning to investors dealing with unregistered entities. The SC stressed that such investors are not protected under the country’s securities laws and are exposed to significant risks, including fraud and money laundering.

Additionally, the regulator has ordered Bybit to cease all promotional activities aimed at Malaysian investors. This includes halting advertisements on social media platforms and shutting down its Telegram support group for local users. These actions come as the SC remains concerned about the potential risks associated with Bybit’s non-compliant operations.

Bybit and its CEO have been under scrutiny since July 2021, when they were first listed on the SC’s Investor Alert List. This list highlights entities that are operating outside of Malaysia’s legal framework, putting investor interests at risk.

Malaysia’s Strict Approach to Cryptocurrency Regulation

The SC’s intervention is part of a broader effort to clamp down on unauthorized cryptocurrency exchanges in Malaysia. Operating a digital asset exchange without being registered as a recognized market operator is a serious violation under Section 7(1) of the Malaysian Capital Markets and Services Act 2007. This highlights the SC’s commitment to ensuring that all cryptocurrency operations are properly regulated, providing safeguards for investors.

The SC has also advised investors to only engage with registered market operators who are subject to regulatory oversight and adhere to strict guidelines designed to protect them. Currently, only six platforms—HATA Digital, Luno, SINEGY, MX Global, Tokenize Technology, and Torum International—are recognized as compliant with the Malaysian regulatory framework.

In the past, Malaysia has also taken action against other unregistered crypto platforms. In May 2023, the SC ordered Huobi Global to cease its operations for similar registration violations. The crackdown is part of the country’s larger strategy to prevent unlicensed operators from undermining investor confidence in the cryptocurrency sector.

The Ongoing Battle Against Illegal Crypto Operations

Beyond exchange operations, Malaysia is also facing issues with illegal Bitcoin mining, a practice that has caused significant economic damage. Since 2018, illegal mining operations have reportedly stolen an estimated $723 million worth of electricity in the country. The authorities have responded by destroying over $1.2 million worth of confiscated Bitcoin mining rigs as part of their efforts to curb the illegal industry.

These actions are just a part of Malaysia’s broader campaign against financial crime. Earlier this year, authorities dismantled a forex investment fraud and cryptocurrency laundering syndicate operating in the Klang Valley. This series of raids underscores the government’s commitment to tackling illicit crypto activities and ensuring a safer digital landscape for legitimate businesses and investors.

Malaysia’s Digital Transformation Strategy: Worldcoin and Beyond

On the flip side, Malaysia is also pushing forward with its digital transformation initiatives. This includes the adoption of Worldcoin’s iris scan technology, which is being used to verify digital credentials. The move is part of Malaysia’s broader strategy to integrate advanced technology into its digital economy, enhancing security and efficiency in various sectors.

Moreover, the country has granted approval for the public trading of Worldcoin tokens on exchanges recognized by the Malaysian authorities. This marks a significant step in Malaysia’s evolving relationship with digital assets, as it aims to balance regulatory control with fostering innovation in the crypto space.

Conclusion: A Cautious Approach to Crypto

Malaysia’s crackdown on Bybit highlights the growing importance of regulatory compliance in the rapidly expanding cryptocurrency sector. While Bybit has faced the brunt of the Securities Commission’s actions, the broader trend is clear: unregistered and non-compliant exchanges are facing increased scrutiny, and Malaysia is taking a firm stance on investor protection.

For crypto investors, this should serve as a reminder to engage only with recognized and regulated platforms. The Malaysian authorities’ enforcement actions against Bybit and other unregistered entities are part of a broader global trend toward tighter regulation of the crypto space. As the sector matures, the pressure on exchanges to comply with local laws will only grow stronger, shaping the future of cryptocurrency in Malaysia and beyond.