Here’s what I discovered after a little bit of searching. The latest announcement made by Bank Negara ( Malaysia National Bank ) stated that they do not endorse Bitcoin or cryptocurrencies and there are currently no plans yet to apply legalization or regulations on digital currencies. However, under the AMLA ( Anti-Money Laundering, Anti-Terrorism Financing & Proceeds of Unlawful Activities Act 2001), all cryptocurrency exchanges operating in Malaysia are subjected to reporting obligations.
Bitcoin and other cryptocurrencies are designed to be decentrailized, in other words, essentially no central authority will be able to place control over them. A bank will not be able to stop you from transacting in Bitcoin. However, due to the nature of cryptocurrencies, a lot of ill-minded individuals or entities have thus leveraged Bitcoin or cryptocurrencies for illegal purposes such as money laundering, drug trafficking and so forth. This is why a lot of government is trying to get involved in regulation of the digital currencies or the activities around it.
In short, to answer your questions, owning Bitcoin or other cryptocurrencies is not illegal in Malaysia, however, digital currencies are not recognized by the government as legal tenders ( Official currencies). So if you were to conduct business in Bitcoin or cryptocurrencies, you are not protected by the law.
To quote bank negara:
I heard that malaysia is trying to regulate cryptocurrency some time ago, perhaps right now it is kind of in the grey area of the law, but once the regulations are out, it should be legal with certain requirements to abide by?