This article first appeared in The Edge Financial Daily on April 24, 2019
KUALA LUMPUR: Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC) have entered into digital asset regulation coordinating arrangements to facilitate industry innovation, raise funds for early-stage companies and trade digital assets.
In a joint statement yesterday, BNM and the SC said the arrangements will also support the oversight of digital asset activities and ensure systemic risk and financial integrity measures remain effective.
“BNM and the SC also discussed recent developments in the financial markets, observing the Malaysian financial markets have remained resilient. Conditions in the capital, foreign exchange (FX) and money markets remained orderly, supported by ample domestic liquidity, robust market infrastructures and firm macroeconomic fundamentals,” they said.
“In particular, the Malaysian bond market is still vibrant with a deep secondary market having an average daily trading volume of RM5.4 billion year-to-date, compared with the past three-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 accounted 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 FX forward market’s liquidity.”
BNM and the SC said the authorities will still engage with key market participants and intermediaries to further develop the Malaysian financial markets’ depth and breadth, ensuring accessibility while preserving stability and transparency.
The joint statement was issued in conjunction with the 16th BNM-SC Bilateral Meeting. The regulators said the meeting aims to advance discussions on areas of mutual interest between them, including sustainability initiatives, digital asset regulations and the financial markets’ resilience.
“The authorities discussed initiatives concerning the sustainability agenda, particularly on the SC’s Sustainable and Responsible Investment Framework (SRI) and BNM’s Value-Based Intermediation Strategy (VBI),” they said.
“Given the alignment between the SRI and VBI, both regulators agreed to embark on a joint-research study to develop a clear taxonomy on sustainable economic activities, starting with the raising of funds 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.”