Malaysian securities watchdog, the Securities Commission Malaysia (SC), is cracking down on Bybit, the prominent cryptocurrency exchange, for illegally offering digital asset trading services in the country.
Global regulations continue to tighten, and exchanges that fail to adapt to changes may risk facing operational shutdowns and penalties. Despite this, tokens are trading near all time highs.
According to a recent statement from the SC, Bybit ran a digital asset exchange in Malaysia without proper registration as a Recognised Market Operator (RMO), which violates the country’s securities laws.
“The SC views this breach seriously, as operating a DAX without obtaining the SC’s registration as a Recognised Market Operator (RMO) is an offence under Section 7(1) of the Capital Markets and Services Act 2007,” said the SC.
The Clampdown
Under the directives of the SC, Bybit has been mandated to disable its website, mobile applications, and any other digital platforms accessible in Malaysia. The exchange is required to immediately halt all advertising directed at Malaysian investors and disband its Telegram support group for local users.
Ben Zhou, as Bybit CEO, was personally held responsible for ensuring compliance with these directives, according to the SC. The enforcement actions are aimed at protecting Malaysian investors. The SC stressed that operating without registration means investors are not protected by Malaysian securities laws and are exposed to risks like fraud and money laundering.
In a statement on its Telegram channel for Malaysian users, Bybit expressed intentions to comply with local regulations and potentially re-enter the market once it has obtained the necessary licenses.
Bybit is not the only cryptocurrency exchange that faces regulatory challenges in Malaysia. In May last year, the SC ordered Huobi, a known exchange linked to Tron’s founder Justin Sun, to halt its operations due to the lack of registration as a RMO.
As part of the crackdown, Malaysian users were also urged to stop trading, withdraw their investments, and close their accounts on the platform.
As of December 2024, the SC has approved only six cryptocurrency exchanges to operate in the country, including MX Global, an exchange backed by Binance.
The SC’s crackdown on Bybit comes swiftly after the regulator took action against Web3 wallet Atomic Wallet. Earlier this month, the securities regulator officially banned the wallet due to its unregistered digital asset exchange operations.
The ban follows heightened scrutiny over Atomic Wallet’s security practices in light of a major hack in 2023 that resulted in losses exceeding $100 million. There were mounting concerns about the wallet’s ability to safeguard user assets and maintain operational integrity.
More Regulations Coming
With tightening regulations across countries worldwide, exchanges like Bybit need to adapt to changes or risk facing operational shutdowns or even fines.
Earlier in October, Bybit was fined €2.2 million by De Nederlandsche Bank (DNB), the Netherlands’ central bank, for operating without the necessary registration under the Anti-Money Laundering and Anti-Terrorist Financing Act.
Despite the fine, Bybit stated that it remains committed to regulatory compliance. The exchange added that it transferred Dutch customers to a compliant local partner to mitigate risks.
Bybit was also blacklisted by France’s Autorité des Marchés Financiers (AMF) for illegal operations within the country. In response, the exchange attempted to secure regulatory approval to operate legally in France but eventually decided to cease services for French users due to increasing regulatory pressure.
The Hong Kong Securities and Futures Commission (SFC) has flagged Bybit’s products as suspicious due to the exchange’s lack of licensing.
The SFC warned investors about the risks associated with engaging with Bybit, particularly regarding unlicensed offerings of futures contracts and other crypto-related services. Although Bybit is applying for a license in Hong Kong, its offshore entity is still under scrutiny.
