Crypto Isn’t Legal Tender In Malaysia – But It Can Still Legally Settle A Debt

Earlier this week, the Court of Appeal has answered that question with a clear yes. Provided that the parties have agreed to it.

In this case, Ong Seow Lee, the lender of a friendly loan, sought to recover RM70,000 from Lee Ee Foong, despite having received 50 Litecoins from Lee Ee Foong. The dispute centred on whether the cryptocurrency transfer constituted repayment of the debt, with the lender arguing that Litecoin was not legal tender and therefore could not discharge the loan.

The Court of Appeal unanimously dismissed the appeal and upheld the High Court's decision, holding that the debt had been fully discharged when the lender knowingly accepted the Litecoin as settlement.

Importantly, while the Court stopped short of recognising cryptocurrency as legal tender, it affirmed that digital assets may validly discharge contractual obligations where the parties expressly or impliedly agree to that mode of payment. The key consideration was therefore not the legal status of the asset itself, but the agreement and conduct of the parties.

Two important observations arise:

• The discharge of a debt depends on the agreement and conduct of the parties, rather than the form of the asset used as payment.
• Digital assets, while not recognised as legal tender, may nevertheless constitute valid consideration for contractual purposes.

Although the dispute involved Litecoin, the significance of this decision extends well beyond cryptocurrency. As digital assets continue to evolve from speculative investments into broader commercial and financial applications, courts are increasingly asked to apply established legal principles to new forms of value.

This decision demonstrates that long-established principles of contract law are sufficiently flexible to accommodate digital assets without requiring new legal doctrines or framework.

The takeaway is clear. If parties intend for cryptocurrency or digital assets to settle contractual obligations, that intention should be documented expressly. Key terms such as the type of digital asset, valuation methodology, timing of payment and wallet details should be clearly addressed.

Technology may evolve, but the underlying legal principles remains constant: the courts will generally give effect to what parties have objectively agreed.

This alert is for general information only and is not a substitute for legal advice.