Rightways: Celebrus advisory

Tuesday, January 15, 2019

SC to regulate digital assets

Good move: Lim says many people have bypassed Malaysia because the policy was not clear about digital assets

Move seen to spur growth in digital currency sector

Regulatory oversight of digital currencies and tokens, which kicks in from today, offers timely clarity and transparency to various players in the fledgling industry.

Omni Capital Partners Sdn Bhd managing director Scott Lim said everything would be above board with the regulation and governance under the Securities Commission (SC).

“Digital assets in Malaysia have been underwhelmed mostly. A lot of people have been bypassing Malaysia because the policy was not clear about it.

“Certainly, now that this is regulated by the SC, it’ll be good. We shall wait for the guidelines,” he said.

Celebrus Advisory co-founder Edmund Yong said the regulation is very much welcomed and one which is needed, as it would spur growth in the industry.

Celebrus is a compliance-first blockchain consultancy firm.

He added that the statement by the Finance Ministry was very accommodative with the intention to use tokens and the recognition of it as a fund-raising tool.

“In fact, it can be an indirect source of foreign direct investment, a borderless method to raise funds.

“But from now until March 31, there will be a twilight period. Many activities will be stopped in their tracks because they don’t know where they stand.

“Some would possibly even move offshore because of the draconian RM10mil and 10-year imprisonment punishment,” said Yong.

He said digital tokens could also be for points in computer games or reward points, and it too would be quite draconian if it is all painted with the same brush.

The Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 kicks in today and any person operating unauthorised initial coin offerings (ICOs) or digital asset exchanges faces up to a 10-year jail term and up to a RM10mil fine.

Digital currencies and digital tokens are collectively known as digital assets, which will now be prescribed as securities.

The SC is putting in place relevant regulatory requirements for the issuance of ICOs and the trading of digital assets at digital asset exchanges in the country.

This is expected to be launched by the end of the first quarter this year.

Finance Minister Lim Guan Eng said the offering of such instruments, as well as its associated activities, would require authorisation from the SC and needed to comply with relevant securities law and regulations.

“The Finance Ministry views digital assets as well as its underlying blockchain technologies as having the potential to bring about innovation in both old and new industries.

“In particular, we believe digital assets have a role to play as an alternative fund-raising avenue for entrepreneurs and new businesses, and as an alternative asset class for investors,” he said in a statement yesterday.

Any person offering an ICO or operating a digital asset exchange without the SC’s approval will face an imprisonment term not exceeding 10 years and a fine not exceeding RM10mil.

Federal Territories Minister Khalid Samad mooted the idea of the Harapan Coin last year, which would be the world’s first political fund-raising platform using blockchain and cryptocurrency technology.

In November last year, shareholders of Country Heights Holdings Bhd approved the company’s plan to conduct an ICO to issue its own cryptocurrency, called “horse currency”.

Country Heights founder and chairman Tan Sri Lee Kim Yew had said that the company would like to be the first to launch cryptocurrency in the country when the regulations are ready.

The company’s plan is to eventually issue one billion horse currencies backed by RM2bil worth of physical assets held by the holding company, with an initial 300 million open to the public for circulation.

StarBizBy ROYCE TAN roycetan@thestar.com.my

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