SC to conduct test on blockchain’s potential in capital markets

We are conducting a pilot project to evaluate the application of blockchain technology, Ranjit says


Despite the uncertain future of initial coin offerings (ICOs) setting a footing in the country, over 10 interested parties are in talks with the Securities Commission Malaysia (SC).

But the country’s guardian of the capital markets has been adamant against cryptocurrency-based crowdfunding, warning investors of the possible high losses due to the unpredictable swing of the digital token.

SC chairman Tan Sri Ranjit Ajit Singh said the potential to suffer losses through ICOs is “very real and consistent with the position taken by many markets around the world”.

“We have stated that for any potential ICOs, when they are trying to raise funds from the public, they could potentially be in breach of securities laws. So, they should come to us and seek clarification on this matter,” he said at the launch of SC’s 2017 annual report in Kuala Lumpur recently.

Ranjit said 12 companies have engaged the SC on the matter, but stressed that the engagements are mere discussions initiated by the companies.

“Our general position is that digital assets have a place in the new frontiers of financial markets. But, we have stated that ICOs are an area where investors have to be very careful. Depending on the appropriate point in time, if we need to do more, we will,” Ranjit said.

Early this year, the SC buried the proposed plan by Singapore-based CopyCash Foundation to launch an ICO in the country.

In its annual report, the regulator said it is reviewing relevant regulations and guidelines to facilitate functional and effective use of digital assets in the capital markets.

“To ensure that the interests of investors are safeguarded, we are collaborating closely with our peer regulators both locally and globally in formulating our policy position and regulations,” it said.

The rise of cryptocurrencies has prompted mixed reactions from monetary authorities around the globe.

Despite the growing followings, many countries have taken precautionary measures like in Singapore, Japan and the US. China has ban cryptocurrency trading and ICOs.

Amid the debate surrounding cryptocurrencies and ICOs, the SC acknowledges the prospects of the underlying technology, namely blockchain or distributed ledger technology which facilitates secure and anonymous transactions.

“We do see a lot of potential in blockchain, and we think it has potential usage for capital market solutions.

“We are conducting a pilot project to evaluate the application of blockchain technology particularly in the unlisted and over-the-counter market segments,” Ranjit said.

The findings of the pilot project will be released this year and published as an industry blueprint, he added.

Blockchain technology, which is already being utilised by certain major bourses worldwide, is noted for its ability to streamline the trading and settlement operations of stock exchanges, thus lowering costs and risks as well as raising anti-money laundering standards.

Among the stock exchanges or exchange organisations that have taken steps toward utilising blockchain technology include the Nasdaq Stock Market, the National Stock Exchange of India, Deutsche Borse AG and the London Stock Exchange.