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Securities Commission Malaysia publishes digital assets guidelines

The Securities Commission Malaysia (SC)

The SC’s guidelines came in response to a previous consultation paper

The Securities Commission Malaysia (SC) has published guidelines on digital assets, stating that all offerings of digital tokens should be carried out through an initial exchange offering (IEO) platform operator.

The Guidelines on Digital Assets has been published as a response to the SC’s earlier consultation paper, Proposed Regulatory Framework for The Issuance of Digital Assets Through Initial Coin Offerings, and will come into force in the second half of 2020.

The paper stated that an Initial Coin Offering allows companies with innovative business proposals to raise capital before doing it through venture capitalists or lenders, and without selling equity or taking out debt in the developing phase.

The new guidelines are based on feedback from the consultation paper, which revealed industry support for the commission’s proposal to leverage the expertise of a platform operator to review applications for issuance of digital tokens for fundraising.

As a result, offerings must be carried out through an IEO platform operator registered with the SC. The operator would be required to carry out the necessary assessment and due diligence to verify the business of the issuer and the fit and properness of the issuer’s board, as well as understand the features of the digital tokens.

Datuk Syed Zaid Albar, Chairman of the SC, commented: “Digital tokens offering can provide another alternative fundraising avenue for early-stage entrepreneurs. This initiative supports Malaysia’s Shared Prosperity Vision 2030 (SPV2030) by supporting the growth of SMEs and micro-businesses which are targeted to contribute 50 per cent to Malaysia’s GDP. It also aligned with SPV2030’s aspiration to create 30 per cent high technology Malaysian companies.”

During the first phase of the implementation of the guidelines, the SC will work with the relevant platform operators in assessing prospective issuers. The issuers must also satisfy governance and capital requirements and demonstrate that their proposed project or business provides an “innovative solution” or a “meaningful digital value proposition” for Malaysia.

The guidelines further state that an issuer may raise funds up to MYR 100 million and tap on investments from retail, sophisticated as well as angel investors, subject to the investment limits. Furthermore, each issuance must be accompanied by a whitepaper, which should provide investors with information on the issuer, the digital token and the utilisation of funds obtained through the issuer’s fund-raising exercise.

After the offering has been successfully completed, the SC will conduct post-issuance monitoring of the utilisation of the proceeds.

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