New digital asset law comes into effect today

This article first appeared in The Edge Financial Daily, on January 15, 2019.
-A +A

KUALA LUMPUR: The new law governing digital currencies and assets — under which it is an offence to offer an initial coin offering (ICO) or operate a digital asset exchange without the permission or approval of Securities Commission Malaysia (SC) — comes into force today.

With the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 in place, digital currencies and tokens are prescribed as securities and regulated by the SC.

Finance Minister Lim Guan Eng said his ministry views digital assets, as well as its underlying blockchain technologies, as having the potential to bring about innovation in old and new industries.

“In particular, we believe digital assets have a role to play as an alternative fundraising avenue for entrepreneurs and new businesses, and an alternate asset class for investors,” he said in a statement yesterday.

“In this regard, the SC will put in place the relevant regulatory requirements for the issuance of ICOs and the trading of digital assets at digital asset exchanges in Malaysia,” he said, adding the framework is expected to be launched by the first quarter of 2019.

Guan Eng said any person offering an ICO or operating a digital asset exchange without the SC’s approval may be punished, on conviction, with imprisonment not exceeding 10 years and a fine not exceeding RM10 million.

The new law comes as governments and regulators around the world are also looking at regulating cryptocurrency-related activities, especially in the wake of a decline in the cryptocurrency market over the past year, with digital assets erasing close to US$700 billion in market capitalisation.

In a separate statement, the SC said it will put in place guidelines to regulate the offering and trading of digital assets.

“The guidelines will, among others, establish criteria for determining fit and properness of issuers and exchange operators, disclosure standards and best practices in price discovery, trading rules and client asset protection.

“Those dealing in digital assets will be required to put in place anti-money laundering and counterterrorism financing rules, cybersecurity and business continuity measures,” it added.

The SC said to implement the regulatory framework on digital assets, the commission and Bank Negara Malaysia will enter into coordination arrangements to ensure compliance with laws and regulations under the purview of both regulators.