Malaysia's Securities Commission (SC) and Bank Negara Malaysia, the country's central bank, are looking at ways to accommodate secondary market trading of cryptocurrency.
The announcement by the SC on November 6 cames about two months after it issued a public warning that initial coin offerings (ICO) in their current form pose “significant risks to investors”.
Although SC Chairman Ranjit Ajit Singh stands by the warning, he says the SC does understand there is growing interest among Malaysian investors in trading cryptocurrency and digital assets.
Speaking to reporters on the sidelines of an SC conference, Mr. Singh says the regulator is “reviewing relevant regulations and guidelines to facilitate effective use” of digital assets in the capital market, “including secondary market trading of established cryptocurrency and digital assets”.
The regulator hopes to have the cryptocurrency-trading framework in place after weighing feedback from industry players globally.
“We hope to be able to have it in the next few months, but I am hesitating to give a specific timeframe. Partly, we want to take advantage of a discussion that is currently taking place at the global regulators level,” Mr. Singh says. “As you know, there are different positions taken by regulators around the world. So, we want to be able to make sure that we have taken the considerations of all factors before making the decision.”
He says the SC is working closely with Bank Negara Malaysia on the matter.
“We will look at the area carefully to apply the right framework. The SC is in charge of secondary markets, therefore our position on the cryptocurrency trading is to craft regulations that the trading venues have the right conditions in place for market integrity, as well as investor protection purposes.”
Bikesh Lakhmichand, founding partner and chief executive office of venture capital firm 1337 Ventures, describes the plan to allow secondary market trading of cryptocurrency as “very forward thinking”.
“The interest level and demand for cryptocurrency is on the rise and it is important for the regulators to acknowledge and embrace this trend,” he tells Asia Asset Management on the sidelines of the conference.
Meanwhile, Mr. Singh says the SC has embarked on a pilot project to explore the usage of Distributed Ledger Technology (DLT) in the unlisted and over-the-counter (OTC) markets.
DLT is a digital system for recording the transaction of assets. The transactions and their details are recorded in multiple places at the same time.
“Traditionally, the unlisted and OTC market space have been opaque due to the lack of information available. By using a distributed ledger as the technology underpinning the market infrastructure, all transactions and market activities would be recorded and made available to all market participants, while still maintaining transaction confidentiality,” Mr. Singh says.
“The findings from the pilot project will be published as an industry blueprint,” he adds.