16 January, 2020 | AtoZ Markets – The Securities Commission (SC) has published guidelines for digital token Offerings in Malaysia or more commonly known to some as digital tokens. The sector has been largely in support of leveraging platform operators to review applications for issuance of digital tokens for fundraising. In essence, digital token offerings will be made through the Initial Exchange Offering (IEO).
ICO Guidelines on Digital Assets in Malaysia
Any company in Malaysia that intends to raise funds through digital tokens have to conduct its offering on an approved IEO operator now. Moreover, the IEO operator must evaluate and approve the issuer and its Correspondent Whitepaper. The Whitepaper must include information such as:
- Details of the issuer,
- Information of the digital token
- How to use the funds obtained through the fundraising exercise.
According to Malaysia's new guidelines, it is illegal for issuers to offer digital tokens before they have obtained IEO approval. The SC also pointed out that until the guidelines comes into force, no person is authorized to offer or issue digital tokens in Malaysia.
The Guidelines will enter into force in the second half of 2020. It will allow potential issuers, platform operators and investors to familiarize themselves with the requirements of the Guidelines.
Read More: ISA Urges to Establish an Israeli Digital Securities Trading Platform
Digital Token Issuer Requirement
The guideline also stated that IEO operators must have a minimum paid-up capital of RM 5 million. The operators must be incorporated locally, unless specified by the regulator. Traders will also require to maintain a trust account for funds received from licensed investors from the Malaysian financial institution.
In regards to the minimum paid-up capital, issuers must have a minimum of 500,000 RM. Fundraising for issuers is subject to a limit of 20 times shareholder funds and a cap of RM 100 million. Also, the issuers cannot raise funds an IEO platform and an equity crowdfunding platform simultaneously.
There is a limit on both retail and angel investors just like equity crowdfunding and peer-to-peer financing. Retail investors limit are RM 2,000 per issuer, with a total investment limit of RM 20,000 over 12 months. Angel investors are subject to a maximum of RM 500,000 within 12 months. But sophisticated investors have no restriction on the investment amount.
Malaysia Develops Regulatory Framework for Digital Currencies
Earlier, AtoZMarkets reported, the commission worked closely with the Central Bank to develop a regulatory framework for the new law on Jan 2019. The new law classifies digital currencies, tokens and crypto-assets as securities, and delegates control of them to the Securities Commission of Malaysia. Chin Wei Min, executive director of the Securities Commission, Digital Strategy and Innovation, explained:
"We are trying to do through this framework to help our early-stage entrepreneurs. This framework will allow them to have a way to raise funds through a different channel. Meanwhile, we are trying to safeguard our sector from scammers. "
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