Abstract:

This paper looks into the legal challenges of consumer protection in blockchain transactions where cryptocurrencies are used. Blockchain is a decentralized computer ledger on which transactions are recorded simultaneously across a network of unrelated computers or servers called “nodes”. With a minimum of 30 transactions per second, blockchain has the ability to cross jurisdictional boundaries as the nodes on a blockchain can be located anywhere in the world. This poses a number of complex jurisdictional issues since every transaction could potentially fall under the jurisdiction(s) of the location of each and every node in the network. It is difficult to determine which governing law will be applicable in case of disputes since identifying the location within the blockchain could be challenging. Even if, the disputes were to arise within the jurisdiction of Malaysia, there is no governing body to protect the consumers. Cryptocurrency exchanges in Malaysia have registered with the Central Bank of Malaysia but they are not a licensed entity under the central bank though they have reporting obligations to the regulator. Since these blockchains are only reporting entities and not regulated entities, there is no element of consumer protection and there is no formal channel in which investors can seek redress should there be any losses incurred when dealing with cryptocurrencies. The regulation also does not address cyber-security aspects, which means if any losses were to be incurred due to hacks, it is likely that Central Bank will not intervene and protect the consumers. Hence the objectives of this paper is to investigate and examine whether blockchain transactions in Malaysia should be regulated in order to protect the consumers and to further investigate and examine how this issue is handled in other jurisdictions. This paper will use both quantitative and qualitative analysis. Not only that a comparative study will be conducted by analysing the practice in other jurisdictions, selected interviews will be conducted with related Government agencies, policy makers and the stakeholders. A survey will be conducted from the general public to get their view. This paper will contribute to the Government in deciding whether regulations should be imposed on Blockchain, since along with positive developments; challenges can arise from the application of such rules