Introduction to CBDC landscape in Malaysia

As technology progresses, the financial world is witnessing a revolution in payment methods and sources of transactions as well. Previously, the world has seen the transformation from physical currency to virtual payment methods like electronic currency. There are multiple platforms for online transactions including Paypal, Wise, Payoneer, and many more that you can use to transfer funds virtually. As of today, the world has been moving toward the digital age, as it has been witnessing the use concept of digital currency in the financial market.

Digital currency is a virtual currency that can be considered as an alternative payment method to physical cash and can be used for business transactions or for any other purpose. One of the main differences between electronic currency and digital currency is that digital currency doesn’t take any physical form. We can convert electronics from a bank account, at any cashpoint and can hold them as a record in physical form while digital cash can never take physical form but only be transferred through digital means.

Digital currency is the kind of currency money or money like forte that can be easily exchanged over on computer system over the internet. There are different kinds of digital currencies like cryptocurrency, virtual currency, and central bank digital currency. In 1983 David Chaum introduced the idea of digital cash. In 2008 Satoshi Nakamoto and his people introduced the first Bitcoin software and the concept of cryptocurrency. 

Digital currency is a term that can be described in different types that exist in the electronic realm. There are three main types of digital currency that include cryptocurrencies, virtual currencies, and Central Bank Digital Currency.  Cryptocurrency is a digital currency, which is as substitute form of deposit generated utilizing encryption algorithms, mainly used for trading and mining. Virtual currency is issued and usually controlled by its planner and accepted electronically by a specific member of the virtual community.

The central bank digital currency is issued by any central bank of the country it is likely cryptocurrency except that their values are fixed by the central bank. While cryptocurrencies are circulated and unchecked. The main difference between CBDC and other digital currencies is that for most of the countries, Cryptocurrency doesn’t hold the legal tender, which does not allow it to be used as a legit payment method. Some countries' central banks around the world have been looking to issue their own digital currencies like China, Sweden, EU, England, and Canada.

The digital currency has some advantages over the traditional currency as the transaction can be processed much faster. The cost of the transaction using the digital currency is very low. Traditional means of transactions for international transfers are very costly as they charge high fee especially when it includes the currency conversion, the usage of CBDC will interrupt this market and individuals can transfer funds internationally with low charges. Traditional online payment transfer platforms usually take a longer time to process the transaction on weekends, while using digital currency would resolve the issue as digital transactions work at speed all week.

It offers greater privacy than other kinds of currency. Anyone who has internet access can utilize digital currency anywhere in the world.

Digital currency also faces different challenges like the risk of money laundering. The cost of production is very high. There must be no refund or cancellation in digital currency. There are many risks concerned with investing in cryptocurrency like loss of capital, government regulation, fraud, and hacking.

Like other countries, Malaysia is also taking steps to regulate and promote the use of digital currency. The Malaysian government’s response to the digital revolution is the main motivation for the people and customers to adopt and accept this revolutionized change in currency.

In order to own the money revolution, Malaysia gave legal status to digital currency. In addition, Malaysia’s central bank, Bank

Negara Malaysia (BNM) has formed a broad outline to ensure the safety, security, and stability of e-money services in the country. Furthermore, it includes customer protection measures and guidelines on operational and risk management.

Moreover, the government stated the guidelines for digital assets and gave five licenses to individual entities. These initiatives attract customers confidence and increase the development of a swift e-money ecosystem in Malaysia. Additionally, the government has been actively promoting financial technology (fin-tech) innovation, including digital currency, through initiatives like the Malaysia Digital Economy Blueprint.

These efforts demonstrate the government's commitment to embracing digital currency and fostering its development in Malaysia. This is how, it is impetus for the digital ecosystems in Malaysia, attracting investment and fostering innovations. In trust, the implications of state initiatives have resulted in cross-border transactions, financial inclusivity, and the potential for Malaysia to become a regional hub regarding digital currency. Therefore, the adoption and usage of digital currency in Malaysia are on the rise, shaping the country's financial landscape.