26 November 2020

On 28 October 2020, the Securities Commission Malaysia (“SC”) issued the Guidelines on Digital Assets (“Guidelines”) which took immediate effect. The Guidelines aim to regulate initial exchange offerings (“IEO”) and digital asset custodians.

Pursuant to the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019, all digital currencies and digital tokens that satisfy the specified requirements are prescribed as securities for purposes of securities laws.

In line with digital currencies and digital tokens being prescribed as securities, the Guidelines set out the requirements which are applicable to:

  • a body corporate that seeks to raise funds through a digital token offering (“Issuer”);
  • a person who seeks to operate an IEO platform; and 
  • a person intending to provide the services of safekeeping, storing, holding or maintaining custody of digital assets for the account of another person.

The Guidelines provide for the following, among other things:  

  • An Issuer must demonstrate to the IEO operator that the IEO project provides an innovative solution or a meaningful digital value proposition for Malaysia; 
  • Content and submission requirements of a “white paper” to be issued with any IEO; 
  • Reporting requirements applicable to an Issuer; 
  • An IEO platform operator has to conduct due diligence and critical assessment on the Issuer in determining whether to approve an IEO; 
  • Limit of funds to be raised by an Issuer; and 
  • Requirements for the purposes of registering a digital asset custodian with the Securities Commission Malaysia.