Dubai-Based Bybit Faces Regulatory Action in Malaysia Over Alleged Unlicensed Operations

Malaysia, which has been actively cracking down on illegal crypto operations, has issued a notice to the Bybit crypto exchange. The Securities Commission Malaysia (SC) has instructed Bybit to suspend its services in the country. According to an official SC statement, the Dubai-based exchange has been operating its digital asset exchange (DAX) unlawfully in Malaysia. Governments worldwide are increasingly enforcing licensing requirements for crypto exchanges to protect their investors from scams and financial risks.

Bybit complied with the SC's directives by disabling its website and mobile app in Malaysia on December 27. The exchange also halted the distribution of advertisements and social media content promoting its platform and services, the SC said in an official post.

“This decision comes after concerns about the platform's compliance with local regulatory requirements and protecting investors' interests. 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,” the SC noted.

Earlier in December, the SC issued a notice to Bybit, raising concerns about its operations. On December 11, Malaysian authorities gave Bybit 14 days to comply with new directives to suspend its activities in the country.

As of now, Bybit CEO Ben Zhou has not commented on the situation. Meanwhile, Malaysian regulators have ensured the exchange has shut down its Telegram support group in the country.

Malaysian citizens are allowed to purchase, hold, and trade cryptocurrencies. According to a report by FreemanLaw, most digital currencies in Malaysia are seen and regulated as Securities under SC's oversight. No cryptocurrency is recognised as a legal tender in Malaysia.

In June this year, Malaysian federal agency Inland Revenue Board (IRB) reportedly conducted raids at multiple locations having identified firms that were not reporting their crypto-related activities.

In its update on Bybit's service suspension, the SC reminded investors to engage only with Recognised Market Operators (RMOs) registered with the commission. These registered entities are required to follow strict guidelines designed to ensure user protection.

“Those who invest in unlicensed or unregistered entities or individuals are not protected under Malaysian securities laws and are thus, exposed to risks such as fraud and money laundering,” the SC noted.