Malaysia's central bank issued the Anti-Money Laundering and Counter Financing of Terrorism Policy for digital currencies in a bid to increase transparency of cryptocurrency activities in the country.

Bank Negara Malaysia said the policy aims to ensure that effective measures are in place against money laundering and terrorism financing risks associated with the use of digital currencies.

The policy identifies digital exchanges dealing with cryptocurrencies as reporting institutions and requires them to assess and mitigate risks related to virtual currencies prior to the launch or adoption of new digital currencies, products, services, business practices and technologies. The policy takes effect Feb. 27.

Further, reporting institutions are required to promptly report suspicious transactions to the central bank's financial intelligence and enforcement department, regardless of the size of the transaction.

The central bank said the move does not equate to it licensing, authorizing, endorsing or validating digital currencies or any entities involved in providing services associated with virtual currencies. It reiterated that digital currencies are not legal tender in Malaysia.