SC warns of unauthorised ICO activities as complaints spike


THE Securities Commission Malaysia (SC) has warned the public not to engage with any individuals who are offering initial coin offerings (ICOs) as the regulator has not finalise the guidelines related to digital token transactions.

The regulator that oversees the country’s capital market has registered a spike in the number of queries and complaints related to ICOs and digital asset exchanges (DAXs).

“Any offering of digital assets and its associated activities, such as marketing or inducing others to subscribe to an ICO, will require authorisation from the SC.

“This follows the coming into force of the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 (Prescription Order) on Jan 15 this year,” it said in a statement yesterday.

The SC has also reminded investors to be mindful of the potential risks associated with ICO schemes, especially issuers who are not physically present in Malaysia and are difficult to verify.

“Furthermore, the recovery of invested monies may be subject to foreign laws or regulations; and the involvement of unauthorised individuals heightens the risk and exposure to fraud, money laundering and terrorism financing.

“Also, the ICO may be structured in such a way as to limit the legal protection and recourse for investors against an ICO issuer and cybersecurity risks including hacking and stealing of online personal information,” the SC said.

It also urged investors to be cautious when considering buying or selling digital assets through trading platforms.

“Even though a platform may call itself an ‘exchange’, it does not mean it has been authorised by the SC,” the regulator said.

As of June 4 this year, the SC has registered three recognised market operators to establish and operate DAXs in Malaysia.

The three DAX operators — Luno Malaysia Sdn Bhd, SINEGY Technologies (M) Sdn Bhd and Tokenize Technology (M) Sdn Bhd — have been given nine months to fully comply with all requirements.

“Apart from the three operators mentioned above, no other online platforms are permitted to establish and operate a DAX in Malaysia currently.

“As such, all other DAX operators are required to immediately cease all activities related to the trading of digital assets and return all monies and assets collected from investors. This also applies to operators who were under the SC’s initial transitional period list,” the SC said.

Operating a DAX, or launching or marketing an ICO without authorisation from the SC is an offence under securities laws.

Persons in breach may be liable to a fine or imprisonment term not exceeding 10 years or both.