SC: Framework to regulate digital asset exchanges, ICOs to come into effect in 1Q19

SC: Framework to regulate digital asset exchanges, ICOs to come into effect in 1Q19
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KUALA LUMPUR (Nov 2): The Securities Commission Malaysia (SC) announced that it will be putting in place the regulatory framework to regulate digital asset exchanges and initial coin offerings (ICOs), and that the regulations will come into effect in the first quarter of 2019.

In a statement, SC said the framework, which was announced by the Finance Ministry during the tabling of Budget 2019 earlier today, is necessary to facilitate a fair and orderly development of this nascent market.

The regulator said this and two other initiatives are to broaden retail investor's participation and stimulate more innovative market-based financing options, leveraging on product innovations and new ways and means of doing business in an age of digital disruption.

The second initiative, the SC said, is a co-investment fund or CIF with a grant of RM50 million that will be established to enable the government to co-invest with private investors in financing the development of new businesses, especially for the micro, small and medium enterprise segment, through equity crowdfunding and peer-to-peer financing platforms.

"The introduction of property crowdfunding platforms, which will be regulated by the SC under a crowdfunding framework, will provide alternative financing options to first-time home buyers and give investors exposure to the property sector through smaller investment amounts. This initiative forms part of a series of Budget 2019 measures to facilitate home ownership," it noted of the third initiative.

During the tabling of Budget 2019 earlier today, Finance Minister Lim Guan Eng said the government will be approving private-sector driven property crowdfunding platforms that will serve as an alternative source of financing for first-time home buyers, and that it will be regulated by the SC under the peer-to-peer financing framework.

"As an example, the buyer will be able to acquire a selected property for 20% of the price of the property, while the balance 80% will be fulfilled via potential investors who are interested to fund the acquisition in exchange for the potential appreciation in value of the property over a particular period of time.

"In simple terms, Ah Chong will be able to own and stay in a RM250,000 property by paying up RM50,000 without having to procure a mortgage. Ali who might only be interested in investing in a new property for capital appreciation will fund the balance of the RM200,000 via the peer-to-peer Property Crowdfunding exchange. This financial innovation will be the first in the world, and if successful, will transform the affordability of homes for first-time home buyers in the country. The first exchange is expected to go live in the first quarter of 2019, after all necessary approvals are obtained from Securities Commission," Lim explained.

The SC said it will work with the relevant stakeholders to operationalise these measures.

"Further details of these measures will be announced in due course. Budget 2019 also announced the establishment of a Special Committee on Islamic Finance led by the Ministry of Finance. Together with the extension of tax incentives for sukuk ijarah and wakalah, this will reinforce Malaysia's position as a global leader in Islamic finance.

"Additionally, the extension of incentives for retail sukuk and bonds will encourage more issuances of such instruments and attract greater retail participation in the capital market," the SC added.