SC cautions investors on Digital Token Scheme


THE Securities Commission Malaysia (SC) cautions investors to be more wary of the Digital Token Scheme — also known as initial coin offerings (ICOs) — that had recently gained traction in the market.

In a statement yesterday, SC said investors need to be more conscious of the potential risks involved in these schemes, as the recovery of the invested monies may be subject to foreign laws and regulation.

“Investors should seek legal or other personal advice if there are doubts on the legitimacy of these schemes.

“They should also fully understand the features of an ICO scheme, and carefully weigh the risks before investing,” SC said, adding that the absence of operators in Malaysia can cause difficulty to verify the authenticity of the scheme.

SC added that investors should also seek the designated operator to issue a white paper that contains the description and details of the scheme.

The ICO scheme raises funds through the issuance and sale of digital token, in exchange for investor paying for these tokens through virtual currencies, such as bitcoin or ethereum.

These schemes can be structured in many forms, including direct investment in projects with the purpose of enabling token holders to participate in a share of returns from the projects. It also seeks funding through foundations and issuances of tokens where investors are entitled to enjoy the rights to a future product or service generated by the project managed by the operator.

ICO is also commonly known as a token pre-sale and crowd-sale token.