By AFIQ AZIZ / Pic By AFP

Malaysia has joined other fast-growing global cryptocurrency countries in regulating its digital assets with the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 coming into force today.

Finance Minister Lim Guan Eng said this allows the Securities Commission Malaysia (SC) to regulate digital assets as prescribed securities.

“The offering of such instruments, as well as its associated activities, will require authorisation from the SC and need to comply with the relevant securities laws and regulations,” Lim said in a statement yesterday.

“We believe digital assets have a role to play as an alternative fundraising avenue for entrepreneurs and new businesses, and an alternate asset class for investors.

“In this regard, the SC will put in place the relevant regulatory requirements for the issuance of initial coin offerings (ICOs) and the trading of digital assets at digital asset exchanges in Malaysia,” he added.

As of last year, there are about 43 Bank Negara Malaysia-registered exchanges.

Last year, Country Heights Holdings Bhd announced a proposed ICO of its Horse Currency tokens and Federal Territories Minister Khalid Abdul Samad mooted Harapan Coin as a part of the ruling coalition’s fundraising programme.

Yesterday, the Kuala Lumpur digital currency exchange and remittance platform Global Capital Bhd announced its joint venture with Red Puffer Sdn Bhd to digitise future transactions between the two by using digital currency.

Amid the regulation announcement, industry observers and stakeholders raised concerns on over-regulation, fearing it would dampen investment and innovation opportunities.

The National Information and Communications Technology Association of Malaysia (Pikom) said the government needs to be cautious to ensure there is no over-regulation.

“Over-regulation may dampen the interests and innovations of these instruments from investment and usage points of view. So, the risk of over-regulating is a concern,” Pikom Research Committee chair Woon Tai Hai told The Malaysian Reserve yesterday.

Crypto Valley Malaysia co-founder Koh How Tze echoed the sentiment, saying that the industry is expected to grow further once the full framework is deliberated and comes into force.

“We could expect more industry participation in a more regulated environment soon, should things go on as planned,” he said.

Industry player Eimir Azli Md Noh from Icoreum said it is unfair to label all digital tokens as securities token.

He proposed the government to conduct “Howey Tests” to differentiate each of the digital token’s functions.

“In the future, I believe all tokens that wish to be regulated should pass certain tests provided by the SC like in the US where ‘Howey Tests’ are mandatory for all tokens to differentiate the category of utility or security token class,” he explained.

CRA Global CEO Mohd Roshaimi Mat Rasid has a similar view, saying the idea could prevent money-laundering activities and provide better interpretations for training companies to educate and spread awareness among investors.

“This (will help monitor) money movement and curb money-laundering activities by the exchanges, as well as illegal fundraising.

“It also helps those who conduct training to educate people on cryptocurrency technology,” he said.

The Order 2019 allows the government to punish any ICO activities and digital asset exchanges that operate without the SC’s approval up to 10 years of imprisonment or fined not less than RM10 million.

Lim said the full framework is expected to be launched by March this year.