The Securities Commission Malaysia (SC) has published the guidelines on digital assets outlining the framework for fundraising through digital token offerings in Malaysia.
As stated in the SC’s earlier consultation paper on the “Proposed Regulatory Framework for the Issuance of Digital Assets Through Initial Coin Offerings”, an Initial Coin Offering allows a company with an innovative business proposal to raise capital before it is able to do so through venture capitalists or lenders. It also allows the company to raise funds without selling their equity or taking out a debt while developing their innovative ideas.
“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 SMEs and micro businesses which are targeted to contribute 50% to Malaysia’s GDP. It also aligned with SPV2030’s aspiration to create 30% high technology Malaysian companies,” said Datuk Syed Zaid Albar, Chairman of the SC.
The Guidelines incorporates feedback received by the SC following the issuance of the consultation paper. Based on the responses received, there is overwhelming industry support for the SC’s proposal to leverage the expertise of a platform operator to review applications for issuance of digital tokens for fundraising.
Thus, the Guidelines sets 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. In this regard, the 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.
Prospective issuers must also satisfy governance and capital requirements in order to be eligible to raise funds through an offering of digital tokens. 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 has been successfully completed, the SC will conduct post-issuance monitoring of the utilisation of the proceeds.
The Guidelines also sets out the requirements for IEO platform operators and the process to seek authorisation from the SC. It will be brought into force in the second half of 2020 to allow potential issuers, platform operators and investors to familiarise themselves with the requirements in the Guidelines. Members of the public are reminded that until the coming into force of the Guidelines, no person is permitted to offer or issue any digital tokens in Malaysia.
The Guidelines are available at the SC website here.
