KUALA LUMPUR (Dec 1): Malaysian cryptocurrency investors who are involved in regulated digital asset exchanges (DAXs) are not exposed to the collapse of crypto exchange FTX, which filed for bankruptcy protection on Nov 11 in the US.
The Securities Commission Malaysia (SC) on Thursday assured cryptocurrency investors that licensed and regulated platforms are adequately protected by SC as it vigorously monitors registered operators for any misconduct.
"Our key message in the current landscape with the fall of FTX and its ripple effect is that Malaysian investors who still have strong appetite for cryptocurrencies must go to regulated operators.
"We are advising those who are trading at unregulated space, to shift to regulated space so that investors have elements of protection. We can't ensure this protection outside of our regulatory regime. That is the important message we are sending to Malaysian investors," SC said in a media briefing on Thursday (Dec 1).
In order for investors to get the protection offered by the SC when trading digital assets that are securities, investors are reminded to use operators registered with the SC, the regulator said. It added that investing in cryptocurrency comes with risk, but investors with an appetite for crypto should go for a regulated platform.
There are currently four SC-registered DAXs in the country, namely Luno Malaysia Sdn Bhd, MX Global Sdn Bhd, SINEGY DAX Sdn Bhd and Tokenize Technology (M) Sdn Bhd.
The regulator said it has increased its oversight of local crypto operators since the FTX saga to obtain absolute assurance that Malaysia's investors stay unharmed.
"These calls to operators could sometimes go up to three times a day. These calls usually mirror global events and we ask if at all they are exposed to the FTX event. If they are not exposed, we ask them why too.
"These kind of questions provide SC the ammunition to protect investors better," the regulator added.
Although cryptocurrencies have enjoyed explosive growth in Malaysia, the market is still relatively small, said the regulator.
The average trading volume (ADV) in DAX is less than 1% of Bursa Malaysia's ADV of 2.17 billion. The value of cryptocurrencies traded daily on average is RM16 million.
"Our regulated digital market is small. The interconnectedness is very contained within our trading venues. Additionally, our regulatory approach is also stringent when it comes to licensing these exchanges. We ask them for control requirements and capital requirements, and we look at it from investors' protection perspective," said SC.
One of the regulator's requirements of operators is to segregate clients' money from operators' own money to protect investors' interest.
"So in the event where the operator is subjected to liquidation and so on, it is easy for SC to identify that money of investors," said SC.
Despite the implosion of FTX that saw panicked investors withdraw some US$6 billion (RM26.43 billion) from the platform in just 72 hours in November, activities in Malaysian DAXs remained relatively stable, SC said.
"There is always a balance between regulating innovation and facilitating innovation. If we impose very strict guidelines, it kills off innovation at the start and defeats the whole purpose altogether," said SC.
The regulator gave assurance that it is putting more resources and expanding the toolkits to enhance enforcement whilst properly protecting investors.