August 6, 2020

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Malaysian Government set to regulate digital trading

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All Malaysian digital asset offerings will now need government authorization and will have to meet anti-money laundering and cyber-security guidelines. The Securities Commission is beginning to implement new regulations on Initial Coin Offerings (ICOs) and the trading of digital assets, this is because up to now this sector has been unregulated.

Malaysia’s Finance Minister YB Tuan Lim Guan Eng announced that cryptocurrencies and initial coin offerings have come under regulation on from Tuesday 14 January.

He said that the “Capital Markets and Services Digital Currency and Digital Token Order, 2019” would establish criteria for coin issuers and exchange operators and bring about disclosure of standards and best practices in pricing, trading and client asset protection.

Any future digital asset offerings will require Securities Commission authorization, will have to meet anti-money laundering and counter-terrorism financing rules and will have to demonstrate cyber-security and business continuity measures.

Mr Lim said that “The Ministry of Finance (MOF) views digital assets, as well as its underlying blockchain technologies, as having the potential to bring about innovation in both old and new industries.  In particular, we believe digital assets have a role to play as an alternative fundraising avenue for entrepreneurs and new businesses, and an alternate asset class for investors.”

As per the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019, crypto currency service providers and exchanges are required to obtain authorization from the country’s Securities Commission, which will work with the central bank to ensure compliance. The Securities Commission Malaysia (SC) said it will issue guidelines to regulate offering and trading of digital assets.

The regulations are expected to be launched before the end of the first quarter in 2019. Any infringements of the new laws can lead to a  fine of up to 10 million Malaysia ringgit and 10 years in prison.

The Securities Commission said that in order to implement the regulatory framework on digital assets, it will coordinate with the Bank Negara Malaysia, the country’s central bank, to ensure compliance with laws and regulations.

Since the announcement of the Capital Markets and Services Digital Currency and Digital Token Order, 2019”, the Securities Commission has been in contact with existing digital asset platform operators and arrangements have been put in place to enable these platforms to continue operating for a transitional period until 1 March 2019, as long as they fulfil conditions laid out by the SC.

During this period, these platform operators are not allowed to accept new investors and will only be allowed to facilitate the withdrawal or transfer of client assets with the written instruction of the investor.

Existing platform operators who failed to or did not attend the engagement with the SC on 17 January 2019 are advised to contact the SC immediately and not later than 25 January 2019, failing which they shall be deemed to be operating a market in breach of the securities laws.

Once the relevant guidelines have been issued, existing platform operators will be required to apply to the SC for authorisation if they intend to operate beyond the transitional period.

With regard to initial coin offerings (ICOs), the Securities Commission Malaysia has stated that ‘no person shall conduct an ICO without the prior authorisation of the SC. In this regard, the guidelines for ICOs will be issued by the end of Q1 2019. In the meantime, ongoing ICOs should cease all activities and return all monies or digital assets collected from investors.’

 

 

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