Malaysia Restricts Crypto activity until new Guidelines

Crypto exchange operators are prohibited from accepting new clients and ICO projects must return all client funds, until the securities regulator is ready to formally authorise their activities.

Malaysia’s SC (Securities Commission) has announced a restrictive transitional period for crypto exchange operators and ICO (initial coin offering) projects until it has put in place new guidelines to regulate the sector.

Earlier this week (15 January), the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 came into force, effectively prescribing cryptocurrencies and digital tokens as securities and granting oversight power of such digital assets to the SC.

“The offering of such instruments, as well as its associated activities, will require authorisation from the SC and need to comply with the relevant securities laws and regulations,” said Malaysian finance minister Lim Guan Eng.

Any person offering an ICO or operating a digital asset exchange without the SC’s approval will face up to 10 years imprisonment and a fine of up to MYR 10 million (USD 2.43 million), he added.

The SC plans to issue new guidelines establishing ‘fit and proper’ criteria for issuers and exchange operators, as well as disclosure standards and best practices for price discovery, trading rules and client asset protection. Those dealing in digital assets will also be required to comply with rules on AML (anti-money laundering) and CTF (counter terrorism financing), cybersecurity and business continuity.

Lim said the SC will put in place the relevant regulatory requirements for digital asset trading and ICO issuances by the end of Q1 2019.

In the meantime, following engagement with the industry, a transitional arrangement has been put in place until 1 March 2019, allowing existing digital asset platform operators to facilitate withdrawals and transfers of client assets, but restricting them from accepting new investors.

Ongoing ICOs, which now require the authorisation of the SC, are required to cease all activities and return all monies or digital assets collected from investors. New guidelines for ICOs are also set to be issued by the end of Q1 2019.