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Malaysia to Regulate ICOs, Cryptocurrency Trade

ICT - Malaysia
February 2019

Malaysia is set to regulate crypto transactions such as Initial Coin Offerings (ICOs) and other cryptocurrency trades. The Securities Commission Malaysia (SC) amended its Guidelines on Recognized Markets on 31 January, 2019 to introduce new requirements for electronic platforms that facilitate the trading of digital assets. Under the revised guidelines, any person who is interested in operating a digital asset platform is required to apply to the SC to be registered as a recognized market operator. Those involved in illegal ICOs and cryptocurrency exchanges could face hefty jail time and fines by the SC. The amended guidelines follow the coming into force of the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019on 15 January 2019. 

Local blockchain industry players such as Malaysia Digital Economy Corporation (MDEC) and Fintech Association of Malaysia (FAOM) have reacted positively towards the new rulings by the SC.  However, they feel that the framework can be more forward-looking to include appropriate control measures on blockchain transactions.

The revised guidelines categorise crypto exchanges as Digital Asset Exchange Operators. The summary of requirements to operate a digital asset platform, including those operating within the current transitional period, are as follows:

  1. Offerors must put up a MYR 5 million (USD 1.2 million) minimum paid capital upon approval and prior to commencement of crypto exchanges.  This minimum paid capital is subject to additional financial requirements on a case by case basis based on the operations and risks to investors posed by the exchange.
  2. There is restriction on providing financial assistance to investors/customers for the purposes of purchasing cryptocurrencies/digital assets
  3. A robust risk management system needs to be put in place to ensure a high degree of security and reliability.
  4. Cryptocurrencies and digital assets have to be approved by SC prior to listing on the stock exchange
  5. There has to be clear rules and procedures in place for the trading, clearing and settlement of digital assets
  6. Players must provide clear, concise and fair disclosures that are not misleading to investors
  7. Trade of digital assets can only be carried out using Ringgit Malaysia and other legal tenders.
  8. Offerors must establish one or more trust account in a licensed financial institution in Malaysia.

Under the revised guidelines, any person who is interested in operating a digital asset platform is required to apply to the SC to be registered as a recognized market operator by 1 March 2019. The full details of the guidelines are available at https://www.sc.com.my/regulation/guidelines/recognizedmarkets.

Meanwhile, the guidelines for ICOs are expected to be released by end of March 2019.

(Sources: Business Insider – Malaysia;The FinTech News; NewsBTC; Securities Commission Malaysia)