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November 2020
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Malaysia begins regulating initial exchange offerings, digital asset custodians

Issuers of digital tokens are required to have a paid-up capital of at least 500,000 ringgit while the minimum for companies seeking to operate an initial exchange offering platform is 5 million ringgit
By Goh Thean Eu   
October 30, 2020

Malaysia will regulate initial exchange offerings and digital asset custodians under new rules which came into force this week which sets minimum capital requirements and a 100 million ringgit (US$24.57 million) limit on fundraising via digital tokens.

Operators of initial exchange offering platforms are required to have a minimum paid-up capital of 5 million ringgit under Securities Commission Malaysia’s (SC) newly revised guidelines on digital assets.

Issuers of digital tokens will need a minimum 500,000 ringgit of paid-up capital and can raise up to 100 million ringgit from retail investors, including high-net-worth individuals.

Platform operators have to conduct due diligence on issuers, review their proposals, and assess their ability to comply with the guidelines.

Digital asset custodians are also required to have a minimum paid-up capital of 500,000 ringgit, and must maintain the same amount in shareholders’ funds at all times.

“The revised guidelines will facilitate the SC’s objectives in promoting responsible innovation in the digital asset space, while at the same time, managing emerging risks and safeguarding the interests of issuers and investors,” the SC says in a statement on October 28, when the new rules came into force.

But the financial requirements are “too much” for Malaysian startups, according to the founder of a Kuala Lumpur-based financial technology company.

““The SC should consider lowering the financial requirements of issuers,” he tells Asia Asset Management, speaking on condition of anonymity. “The IEO platform operators do not want investors to get burnt by taking part in an IEO via their platform, so it is in their best interest to ensure they do a thorough due diligence on the issuers.”

Firms that want to register as platform operators or digital asset custodians have to submit applications to the SC by February 15, 2021.