Malaysia to Finalise Regulatory Framework for ICOs by Year-End

Malaysia’s SC (Securities Commission) is expected to finalise its regulatory requirements for the issuance of by year-end, reported local media.

A monitoring framework on the trading of digital assets through ICOs has already been drafted by the SC and is now under review by relevant stakeholders, according to deputy finance minister Datuk Amiruddin Hamzah.

In January, ICO issuers were required to cease all ongoing activities and return all monies or digital assets collected from investors until new guidelines were in place. At the time, this was expected by the end of Q1 2019.

In March, the SC issued a consultation paper on the ICO framework, proposing that third parties would be used to assess issuers according to certain criteria, including safeguards for shareholders and token holders, AML and related party transaction monitoring, and cyber risk management.

The framework had specified a minimum paid-up capital of MYR 500,000 (USD 121,000) for ICO issuers, which must be controlled by Malaysian nationals. Fundraising would be capped at 10 times shareholders’ funds, subject to a MYR 100 million ceiling, among other requirements.

“The regulatory approach taken by Bank Negara Malaysia and SC is intended to spur innovation in the industry, while ensuring that risks on digital assets trading activities remain under control,” Amiruddin said.

“To increase transparency and reduce the risk of money laundering and terrorism financing, regulations have been issued to introduce obligatory reporting and customer due diligence for the digital assets market.”

Separately, the SC has released a statement, advising the public to be wary of any persons offering ICOs, citing difficulties in verifying ICO authenticity; risks related to cybersecurity, fraud and money laundering; and a lack of recourse for investors.

“The SC has not authorised any ICOs pending the finalisation of its guidelines,” it said adding that only three digital asset exchanges have been authorised to operate in Malaysia.

Any other persons operating such an exchange or launching or marketing an ICO without authorisation may face fines and/or up to 10 years’ imprisonment, the SC warned.

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