SC has received encouraging interest in the last 4 months from institutions which want to be IEO operators
by AFIQ AZIZ / pic by MUHD AMIN NAHARUL
MALAYSIA may have its first cryptocurrency offerings earliest by 2022, as interest in digital assets has been growing over the past four years.
The Securities Commission Malaysia (SC) has received encouraging interest in the last four months from institutions which want to be initial exchange offering (IEO) operators.
IEO operators are market operators who facilitate fundraising activity in the digital asset space.
Like the initial coin offering (ICO), IEO will allow businesses to raise capital for their projects, for example by issuing digital tokens in exchange for fiat currency.
In October last year, the SC revised its Guidelines on Digital Assets, which regulate the IEO, and the digital asset custodians (DACs).
Firms that would like to be an IEO operator must submit their application by Feb 15, 2021.
“Upon receiving SC’s approval in principle, the IEO platform operators and DACs will have up to nine months to fully comply with all regulatory requirements and put in place adequate investor protection measures before they can commence operations,” SC spokesperson told The Malaysian Reserve (TMR) in an email reply last week.
The regulator will take into consideration factors such as the applicant’s value proposition, technology competencies, and compliance and risk management frameworks before issuing an approval in principle for successful applicants.
There will be no deadline for DAC application.
Currently, the SC has licensed three firms to run exchange platforms, namely Luno Malaysia Sdn Bhd, Sinegy Technologies (M) Sdn Bhd and Tokenize Technology (M) Sdn Bhd.
For the past three years — after Bitcoin’s first bull run in December 2017, the usage and investment in cryptocurrency have become popular in Malaysia.
Listed companies have shown interest to raise funds through ICO. One such company was Country Heights Holdings Bhd which had called its cryptocurrency “Horse Currency”.
In September 2018, the company sought endorsement from its shareholders for the venture at an extraordinary general meeting. However, the SC did not warrant such method of fundraising due to its strict stance on the controversial method.
Luno Malaysia country manager Aaron Tang said with the IEO space finally being regulated, local investors can invest in new and exciting technology companies that seek to raise funds via cryptocurrency.
The IEO, he said, will be conducted in a safer and risk-mitigated environment.
“SC’s regulation essentially mandates every IEO fundraising campaign to be conducted by an IEO operator, which will have the onus to conduct all necessary due
diligence and administer the fundraising campaign on behalf of fundraisers with investors’ interest being placed at the forefront of its responsibility,” he told TMR.
Tang added that Luno Malaysia is yet to decide if the company will come on board to be part of the IEO ecosystem.
“We are still considering whether to apply, and if this aligns with our strategy for 2021 and beyond.”
Based on precedent, Tang predicted the first batch of approved IEO platforms to announce their success within the next 12 to 18 months.
The SC expects the IEO platform will broaden funding avenues for companies with innovative business proposals to raise capital via digital token offerings.
“This will complement existing funding sources such as equity crowdfunding and peer-to-peer financing, as well as venture capital and financial institutions.
“As one of the first few regulators in the Asean region to regulate IEOs, the SC continues to encourage and facilitate innovative financing solutions in Malaysia to meet market needs, while at the same time having in place appropriate safeguards to ensure investor protection and market integrity,” said SC.
Editor’s note: The article has been updated to reflect better accuracy
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