This article first appeared in The Edge Financial Daily on March 16, 2018

KUALA LUMPUR: The Securities Commission Malaysia (SC) said several companies that are looking to conduct initial coin offerings (ICOs) are in engagement with the regulator, but made it clear that these engagements are purely for discussions and nothing more.

SC chairman Tan Sri Ranjit Ajit Singh said the companies had approached the regulator, instead of the other way around, adding that it is important for these players to seek advice, as raising funds through ICOs could potentially be in breach of existing securities law.

“We have stated very clearly that for any of these potential ICOs, when they are trying to raise any funds from the public, they could potentially be in breach of securities laws and therefore they must come to the SC to seek clarification on this.

“That’s the position that we have taken and there have been several that have engaged with us and are currently engaging with us,” he said at a press conference yesterday, adding that there have been 12 companies so far that are in talks with the SC.

Ranjit added that if the regulator does find other potential ICOs that could be in breach of securities laws through its own review of their whitepapers, it will take the appropriate action depending on the nature of the breach.

He also pointed out that the regulator had earlier this year blocked the ICO of Singapore-based CopyCash, which was slated to launch its cryptocurrency, CopyCashCoin, in January.

However, Ranjit made it clear that the engagements with these cryptocurrency issuers have been purely for discussions and nothing more, and reiterated the regulator’s cautionary stance on ICOs.

“We have stated that this is an area that investors have to be very careful about. We issued several cautionary statements around this and the potential for investors to suffer losses through an ICO is very real. This is consistent with the position that has been taken by many markets around the world,” he said.

Meanwhile, Ranjit said the SC will continue to monitor developments in the digital asset space and added that the regulator will do more, if there is a need for it.

“Our general position is that digital assets have a place in the new frontier of financial markets, but investors certainly need to exercise caution,” he said.

While there has been a lot of debate surrounding cryptocurrencies and ICOs, Ranjit said the regulator does see great potential in the application of blockchain for capital market solutions.

In fact, the SC has conducted a blockchain pilot project in the unlisted and over-the-counter markets to evaluate the application and effectiveness of the technology.

Ranjit said the SC will be sharing its findings from the pilot project some time this year, which will be published as an industry blueprint.