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Digital Currencies, Digital Tokens, Digital Exchanges and its Operators – the Malaysian Regulatory Landscape

Two recent developments have impacted the Malaysian regulatory landscape in relation to digital assets, digital exchanges and their operators.

Digital Currencies and Digital Tokens are Securities

Firstly, the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019, which came into force on 15 January 2019, provides that digital currencies and digital tokens which fulfil certain specific features (and are neither issued nor guaranteed by any government body or central bank) are prescribed as securities.

This prescription of digital currencies and digital tokens as securities is significant as it subjects them to the application of the provisions of the Malaysian Capital Markets and Services Act, 2007 (“CMSA”). This in turn, affects how such digital currencies and digital tokens can be offered in Malaysia.

By prescribing certain digital currencies and digital tokens as securities, any person who wishes to make available, offer for subscription or purchase, or issue an invitation to subscribe for or purchase the same will be required to seek the approval of the Securities Commission (“SC”) under the CMSA and register a disclosure document. It is anticipated that the SC will issue, by the first quarter of 2019, the relevant regulatory requirements for the offering of digital currencies and digital tokens (e.g. initial coin offerings) and the trading of such digital assets.

Another significant consequence of such prescription is that persons who carry on a business of dealing in digital currencies and digital tokens would fall under the licensing regime under the CMSA.

Guidelines on Recognized Markets

The second development was the revision by the SC of its Guidelines on Recognized Markets on 31 January 2019 (the “Guidelines”). The revision, among other things, introduces new requirements for electronic platforms that facilitate the trading of digital currencies and digital tokens, and follows the coming into force of the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019.

Under the Guidelines, any person who is interested in operating a digital asset platform is required to apply to the SC to be registered as a recognized market operator.

If you have any queries arising from the above developments, please do not hesitate to get in touch with our team.

Ivan Ho Yue Chan

Partner

[email protected]

 

Tan Gian Chung

Partner

[email protected]

Karen Kaur

Partner

[email protected]

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