Image credit: the malaysian reserve

KUALA LUMPUR: The Securities Commission (SC) has today published guidelines on digital assets, outlining the framework for fundraising through digital token offering in Malaysia.

The SC said the guidelines would be effective in the second half of 2020, allowing potential issuers, platform operators and investors to familiarise themselves with the requirements.

The regulator said an initial coin offering (ICO) allows a company with an innovative business proposal to raise capital before it is able to do so through venture capitalists or lenders.

It added that the ICO allows the company to raise funds without selling its equity or taking out a debt while developing innovative ideas.

The guidelines incorporated feedback received by the SC’s earlier consultation paper on the “Proposed Regulatory Framework for The Issuance of Digital Assets through ICOs”.

The SC chairman Datuk Syed Zaid Albar said digital tokens offering can provide another alternative fundraising avenue for early stage entrepreneurs.

“This initiative supports Malaysia’s Shared Prosperity Vision 2030 (SPV2030) by supporting the growth of small medium enterprises and micro businesses which are targeted to contribute 50 per cent to Malaysia’s gross domestic product,” he said in a statement today.

Syed Zaid said the initiative also aligned with SPV2030’s aspiration to create 30 per cent high technology Malaysian companies.

The SC said there was overwhelming industry support to its proposal to leverage the expertise of a platform operator to review applications for issuance of digital tokens for fundraising.

Thus, it said the guidelines set out the requirements for all offerings of digital tokens to be carried out through an initial exchange offering (IEO) platform operator that is registered with the SC.

The SC said IEO platform operator would be required to carry out the necessary assessment and due diligence to, among others, verify the business of the issuer and the fit and properness of the issuer’s board, as well as understand the features of the digital tokens.

During the first phase of the implementation of the guidelines, the SC will work with the relevant platform operators in assessing eligible issuers.

It added that prospective issuers must also satisfy governance and capital requirements to be eligible to raise funds through an offering of digital tokens.

The SC said issuers are required to demonstrate that their proposed project or business provides an innovative solution or a meaningful digital value proposition for Malaysia.

An issuer may raise funds up to a ceiling of RM100 million and tap on investments from retail, sophisticated as well as angel investors, subject to the investment limits provided in the guidelines.

Each issuance must be accompanied by a Whitepaper, which should provide investors with among others, material information on the issuer, the digital token and the utilisation of funds obtained through the issuer’s fund-raising exercise.

After the offering had been completed, the SC said it would monitoring the utilisation of the proceeds.

The guidelines also set out the requirements for IEO platform operators and the process to seek authorisation from the SC.

At the moment, no person is permitted to offer or issue any digital tokens in Malaysia until the coming into force of the guidelines.