Article By Vincent Fong
January has been no picnic for Malaysia’s crypto-exchanges, with the possibility of RM10 Million fine and 10 years jail time looming over them ever since the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 was announced by Finance Minister Lim Guan Eng.
Fortunately the uncertainty has been lifted off the air with Securities Commission Malaysia (SC) issuing its much anticipated framework for crypto-exchanges.
The new framework will fall under the purview of its Guidelines on Regconised Markets, which is the same that is used to regulate Equity Crowdfunding and P2P lending players. Under the same guideline, the regulator has amended a section to introduce new requirements for crypto exhanges.
Requirements for Cryptocurrency Exchanges to Operate in Malaysia under the New Guideline
The revised guidelines categorises crypto exchanges as Digital Asset Exchange Operators. In summary here are few requirements that cryptocurrency exchanges will need to comply with in order to operate in Malaysia.
Though for a more precise read it would be best to head over to Securities Commission Malaysia’s website to get the full details of the guideline.
- 5 Million paid capital upon approval and prior to commencement
- Restriction on providing financial assistance to investors/customers for the purposes of purchasing cryptocurrencies/digital assets
- A robust risk management system needs to be put in place to ensure a high degree of security and reliability.
- Cryptocurrencies and digital assets have to be approved by SC prior to listing on the exchange
- Have clear rules and procedures in place for the trading, clearing and settlement of Digital Assets on the platform
- Provide clear, concise and fair disclosures that are not misleading to investors
- To only allow trade to be carried out using Ringgit Malaysia and other legal tenders
- Establish one or more trust account in a licensed financial institution in Malaysia
The regulator also noted on point No.1 that the minimum paid capital is subject to additional financial requirements on a case by case basis based on the operations and risks posed by the exchange.
Under the revised guidelines, any person who is interested in operating a digital asset platform is required to apply to the SC to be registered as a recognized market operator by 1 March 2019
Commenting on the new guideline Datuk Syed Zaid Albar, SC Chairman said, “The new framework is part of the SC’s efforts to promote innovation while ensuring investor protection in the trading of digital assets,”He added that while there is a framework to facilitate the trading of digital assets, investors are reminded to be mindful of the risks when dealing in digital assets such as sudden price fluctuations and liquidity risks.
Meanwhile, guidelines for ICOs have yet to be released and is slated for end of March 2019.