Malaysia’s securities watchdog, the Securities Commission of Malaysia (SC), is cracking down on Bybit, the prominent cryptocurrency exchange, for illegal offering digital asset trading services in the country.
Global regulations continue to tighten, and exchanges that do not adapt to changes may be at risk of closure and operational penalties. Despite this, signals are trading near all-time highs.
According to a recent SC statement, Bybit ran a digital asset exchange in Malaysia without proper registration as a Recognized Market Operator (RMO), which violates the country’s securities laws.
“The SC views this breach as an offense under Section 7(1) of the Capital Markets and Services Act 2007 to operate DAX without obtaining the SC’s registration as a Recognized Market Operator (RMO),” said the SC.
The Clampdown
Under the SC directives, Bybit is mandated to disable its website, mobile applications and any other. accessible digital platforms in Malaysia. The exchange must immediately stop all advertising aimed at Malaysian investors and disband its Telegram support group for local users.
Ben Zhou, as CEO of Bybit, was personally responsible for ensuring compliance with these instructions, according to the SC. The enforcement actions are aimed at protecting Malaysian investors. The SC stressed that operating unregistered means investors are not protected by Malaysian securities laws and are exposed to risks such as fraud and money laundering.
In a statement on its Telegram channel for Malaysian users, Bybit expressed its intention to comply with local regulations and may re-enter the market after obtaining the necessary licenses.
Bybit is not the only cryptocurrency exchange facing regulatory challenges in Malaysia. In May last year, the SC ordered Huobi, a well-known exchange linked to Tron founder Justin Sun, to stop its operations due to the lack of registration as an RMO.
As part of the crackdown, Malaysian users were 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 quickly after the regulator took action against Web3’s 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 of Atomic Wallet’s security practices in light of a major hack in 2023 that resulted in losses of over $100 million. There has been increased concern about the wallet’s ability to protect user assets and maintain operational integrity.
More Regulations Coming
With regulations tightening across countries around the world, exchanges like Bybit must adapt to changes or risk halting operations or even fines.
Earlier in October, De Nederlandsche Bank (DNB), the central bank of the Netherlands, fined Bybit €2.2 million for operating without the required registration under the Anti-Money Laundering and Anti-Terrorist Financing Act.
Despite the fine, Bybit said it remains committed to regulatory compliance. The exchange added that it had moved 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 tried to get regulatory approval to operate legally in France but ultimately decided to end services to French users due to increased regulatory pressure.
Hong Kong’s Securities and Futures Commission (SFC) has declared Bybit’s products as suspect due to the exchange’s lack of licensing.
The SFC has warned investors about the risks of engaging with Bybit, particularly in relation to unlicensed offers of futures contracts and other crypto-related services. Although Bybit is applying for a license in Hong Kong, its offshore entity remains under scrutiny.
