On January 12, 2018, the London-based cryptocurrency exchange Luno released a statement acknowledging that local authorities have frozen its bank account in Malaysia.
Users across the country have been unable to complete deposits or withdrawals at Luno since at least mid-December 2017. Now, according to a post made by the company, the Malaysian Inland Revenue Board (IRB) was responsible for freezing the company’s bank account citing tax-related reasons.
The exchange also stressed that all funds stored on the platform, whether fiat or digital, remain safe.
Luno operates in several countries around the world, including those in Africa, South-East Asia and the continent of Europe. While customers in Malaysia are currently affected due to the ongoing investigation by the country’s tax authorities, users in other regions can continue to trade on the exchange regardless.
Furthermore, Luno stresses that even its Malaysian users can continue using the platform for trading activities that do not involve withdrawals or deposits in the Malaysian Ringgit (MYR).
Tax issues like Lunos’ are not uncommon as a country’s legal authority pursues potential fraudulent behavior on exchanges and its traders. Just a few weeks ago, the Indian Income Tax authorities audited some cryptocurrency marketplaces and issued notices to several high net-worth individuals who had not declared their gains to the government.
Even before that, in November 2017, the United States Internal Revenue Service demanded that Coinbase hand over identifying records for users that had traded over $20,000 of cryptocurrency between 2013 and 2015.
Regulatory Bodies Looming
The widespread government crackdowns on cryptocurrency gains come just after the market experienced what was perhaps its best year since its’ inception. After all, 2017 not only saw bitcoin almost break through the $20,000 barrier but also witnessed the market cap of all digital currencies shoot well over half a trillion dollars.
Thus, for early adopters and keen investors, this bull market has been a source of unprecedented profit. Furthermore, since most countries typically classify cryptocurrency gains as capital gains, government scrutiny of the market had to be expected sooner rather than later.
To that effect, Luno has encouraged its Malaysian customers to comply with local tax laws and declare any gains that they may have realized.
Bank Negara Malaysia, the country’s central bank, has been actively drafting guidelines and regulations surrounding the cryptocurrency ecosystem since November 2017. A month later, it invited the public to review drafts of the proposed guidelines and submit any responses before January 14, 2018.
As such, Malaysia does not recognize digital currencies as legal tender. It is likely due to this increased attention by the Malaysian government that Luno, one of the most popular exchanges in the region, is currently facing trouble with its bank accounts.