Increasing financial corruption and a weakening currency pushes people to try alternative financial systems like Bitcoin. No wonder that Bitcoin is thriving in Malaysia.
1MDB – Malaysia's Brush with High Level Corruption
1Malaysia Development Bhd, or 1MDB as it is popularly known, is a state investment vehicle set up in 2009 to turn Kuala Lampur into a global financial hub. It started to run into problems in 2015 and has missed repayments on its debt obligations this year.
More than 10 countries across the world (including US, Switzerland and Singapore) have opened investigations into its affairs.
After a furore over corruption allegations, the advisory board of 1MDB headed by Malaysian PM Najib Razak was dissolved in May 2016 and a fresh board appointed.
Ordinary Malaysians Frustrated
The corruption-tainted transactions of 1MDB, which was set up using public money, has left ordinary Malaysians frustrated. The Malaysian Anti-Corruption Commission Chief stepped down 2 years before his term ended, in the midst of the probe into the 1MDB scandal.
Certain liabilities of 1MDB are guaranteed by the Malaysian Government and the failure of 1MDB will increase the budget deficit of Malaysia.
The Malaysian Ringgit has steadily depreciated since the start of 2015, driven by low commodity prices (primarily oil) and the scandal surrounding 1MDB.
Bitcoin Trading Volumes Jump
Trading volumes of Bitcoin in Malaysia have jumped, as shown in the below chart from coin.dance.
The increased demand for bitcoins in Malaysia is no surprise – countries with weakening economies and loss of faith in the government have always seen people turn to Bitcoin. It is a vote of no-confidence in both the government and the currency.
This pattern has been repeated in countries ranging from Zimbabwe to Venezuela. Unlike the 1990s, the fortunes of the citizens of a country need not be tied to the fortunes of the country. Bitcoin provides them with an escape route. It is time governments realized that.