KUALA LUMPUR (April 23): Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC) have entered into digital asset regulation coordinating arrangements, which will facilitate industry innovation, fundraising activities for early-stage companies and trading of digital assets.

BNM and the SC said in a joint statement today the arrangement will also support the oversight of digital asset activities and ensure that systemic risk and financial integrity measures remain effective.

"BNM and the SC also discussed recent developments in the financial markets and observed that the Malaysian financial markets have remained resilient. Conditions in the capital, foreign exchange (FX) and money markets continued to be orderly, supported by ample domestic liquidity, robust market infrastructures and firm macroeconomic fundamentals.

"In particular, the Malaysian bond market continues to be vibrant with a deep secondary market having an average daily trading volume of RM5.4 billion year-to-date compared to the past 3-year average of RM3.6 billion. Liquidity in the FX market recorded a sustainable average daily trading volume of US$12 billion (about RM50 billion), of which the FX swap and forward market accounts for close to half of the average volume. The increase in dynamic hedging activities by global institutional investors has improved market access and further contributed to the liquidity in the FX forward market," they said.

BNM and the SC said the authorities will continue to engage with key market participants and intermediaries to further develop the depth and breadth of the Malaysian financial markets in ensuring accessibility while preserving stability and transparency.

BNM and the SC said they issued the joint statement in conjunction with the 16th BNM-SC Bilateral Meeting. The regulators said the meeting aims to advance discussions on areas of mutual interest between both authorities, including sustainability initiatives, digital asset regulations and resilience of the financial markets.

"The authorities discussed initiatives relating to the sustainability agenda, particularly on the SC's Sustainable and Responsible Investment Framework (SRI) and BNM's Value-Based Intermediation Strategy (VBI). Given the alignment between SRI and VBI, both regulators agreed to embark on a joint research study to develop a clear taxonomy on sustainable economic activities starting with fundraising and lending practices.

"Another area being looked at involves understanding the transmission of climate and environmental-related risks to the financial system and economy, and the feedback loop. This initiative is an expansion of ongoing collaboration between the authorities in areas of national strategic interest especially in Islamic finance," they said.