The Malaysian Securities Commission (SC) has taken decisive action against the cryptocurrency exchange Bybit, directing both the platform and its CEO, Ben Zhou, to halt all operations within the country. This move arises from Bybit’s failure to obtain the necessary approval to function as a digital asset exchange (DAX) within Malaysia’s regulatory framework. The SC emphasized that failing to comply with local regulations can severely undermine investor protection, a fundamental aspect of any regulatory environment.
Under Malaysia’s Capital Markets and Services Act of 2007, any entity wishing to operate as a DAX must secure approval as a Recognized Market Operator (RMO). The SC has made it clear that Bybit’s non-compliance is a significant breach of the law, one that poses potential risks to the investing public. In light of this, the regulatory body has set a deadline for Bybit to deactivate its website and mobile applications by December 25, rendering the platform unaccessible to Malaysian users. Additionally, all promotional activities targeting local investors must be terminated immediately, alongside an order to disband the platform’s Telegram support group for users in Malaysia.
This development follows a lengthy period of scrutiny for Bybit, which has been on the SC’s Investor Alert List since July 2021. This list is designed to warn investors about unregistered entities and individuals operating in the cryptocurrency space, and it also includes other exchanges like Bitget and Atomic Wallet. The SC’s actions are part of a larger narrative urging Malaysian investors to engage exclusively with entities that have received proper regulatory approval, thereby ensuring adherence to established legal and operational standards.
While the SC recognizes cryptocurrencies as a legitimate investment vehicle, they do not qualify as legal tender in Malaysia. The regulatory environment is designed to maintain a safe marketplace, with stringent compliance measures for crypto operators. Currently, only six exchanges meet these requirements, highlighting the restricted nature of the market.
The repercussions of the SC’s directive are immediate, particularly for Malaysian users who have reported being unable to access their accounts since December 24. Bybit has indicated a desire to rectify its regulatory standing, stating intentions to re-enter the Malaysian market once it has secured the necessary licenses. However, Bybit’s challenges are not confined to Malaysia. The platform is also facing increased scrutiny in other jurisdictions; it has announced a suspension of withdrawal and custody services for its users in France starting January 8, 2025, again due to heightened regulatory oversight.
Founded in 2017, Bybit has rapidly ascended to become one of the largest cryptocurrency exchanges globally, boasting over $16 billion in assets under management according to CoinMarketCap. However, these regulatory hurdles raise critical questions about the sustainability of Bybit’s operations and the ongoing viability of its business model in multiple markets. As the landscape of cryptocurrency regulation continues to evolve, the exchange must navigate not only compliance challenges but also maintain investor confidence amidst growing scrutiny.
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