In a decisive move, Malaysia’s Securities Commission (SC) has mandated that Bybit, a well-known cryptocurrency exchange, and its CEO Ben Zhou shut down all operations within the country. This action underscores the persistent issues surrounding regulatory compliance that have plagued the crypto industry globally. The SC’s recent announcement explicitly cites Bybit’s inability to obtain the necessary authorization to function as a digital asset exchange (DAX) in Malaysia, calling attention to the broader implications of operating without legal approval.
At the heart of this regulatory action is Malaysia’s Capital Markets and Services Act of 2007, which categorically prohibits the operation of a DAX without being recognized as a Recognized Market Operator (RMO). The SC’s stance reveals a significant commitment to investor protection and regulatory frameworks aimed at curbing potential risks to the public. Bybit’s disregard for these regulations not only highlights its operational non-compliance but raises questions about the platform’s governance and standards.
The SC’s decision to issue a directive for Bybit’s immediate cessation of operations, including shutting down its website and mobile applications, is not merely punitive but proactive. The directive directs Bybit to halt marketing activities targeted at Malaysian users and disband its Telegram support group, further isolating the exchange from the Malaysian market. This comprehensive approach to enforcement underscores the urgency of regulatory compliance in the fast-evolving landscape of digital assets.
Interestingly, Bybit has been on the SC’s Investor Alert List since July 2021, which serves as a warning to local investors against engaging with unregistered entities. The list isn’t limited to Bybit; it includes other platforms like Bitget and Atomic Wallet, underscoring a widespread challenge in the crypto industry regarding adherence to legal frameworks. The SC’s exhortation for investors to engage only with approved RMOs is a critical reminder of the importance of regulatory compliance. This guidance is crucial, especially considering that only six exchanges have obtained licenses from the SC to operate legally in Malaysia.
While cryptocurrencies are acknowledged as legal assets, they are not classified as legal tender, which further complicates the operational landscape for exchanges. The SC closely monitors compliance and imposes stringent requirements on crypto operators, emphasizing the need for transparency and legal adherence.
Bybit is facing hurdles that extend beyond Malaysia’s borders. The exchange recently announced it would halt withdrawal and custody services for users in France, citing strengthened regulatory scrutiny there as well. Launched in 2017, Bybit has grown to be one of the world’s largest crypto exchanges, which raises the stakes on its compliance strategies. As its operations are now curtailed in Malaysia and potentially more regions, Bybit’s efforts to re-enter the market hinge on its ability to secure the necessary licenses.
This episode serves as a cautionary tale for other crypto exchanges. The regulatory landscape is evolving, and platforms must navigate these changes carefully to avoid dire consequences. As scrutiny from global authorities intensifies, the necessity for robust compliance mechanisms will only become more pronounced. For investors and industry stakeholders alike, the message is clear: operating in the shadows of regulation is a precarious endeavor.