Online Forex trading has gained momentum amongst Malaysian retail investors as traders saw strong potential gains during the last 5 years, however the central bank has been creating a fuss and today announced major turnaround for traders and brokers in this massive market place.
Bank Negara Malaysia clarified on Thursday that the buying and selling of foreign currency in Malaysia is only allowed with licensed commercial banks, Islamic banks, investment banks and international Islamic banks as provided for under the Exchange Control Act 1953.
Such trading is also allowed with licensed money services business providers (money changers) as provided for under the Money Services Business Act 2011.
In addition, Shariah-compliant financial products, including foreign exchange related transactions, offered and transacted by licensed Islamic financial institutions are approved by the Shariah Committee of the respective financial institutions with endorsement from the Shariah Advisory Council of Bank Negara Malaysia, Bank Negara said in a statement.
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The clarification follows the National Fatwa Council’s ruling that foreign exchange trading is forbidden for Muslims.
The council’s chairman, Tan Sri Dr Abdul Shukor Husin, said on Wednesday that Muslims should not engage in forex trading as there were many doubts about it and that it involved individuals using the internet, with uncertain outcomes.
However, he said other forms of trading in foreign currencies, such as by money changers or between banks, were permissible, as they do not involve currency speculation or uncertain outcomes.
Bank Negara put a stop to overseas money transfers in 2010 which consequently saw a decline in trade volumes.
Forexmagnates team is covering South East Asias largest economy – Singapore in the next quarterly report.