Digital Currencies and Digital Tokens are Regulated as Securities Under Malaysian Securities Laws

January 17

Pursuant to the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 (the “Prescription Order“), which came into force on 15 January 2019, digital currencies and digital tokens which are not issued or guaranteed by any government body or central bank, and fulfils other specific features, are prescribed as securities.

The implications of treating digital currencies and digital tokens as securities are significant as the Malaysian Capital Markets and Services Act 2007 (“CMSA“) would apply. In effect, this would mean that digital currencies and digital tokens will now be primarily regulated by the Securities Commission (“SC“). This in turn will affect how digital currencies and digital tokens can be offered and traded in Malaysia moving forward.

Implications to businesses

  1. Persons who intend to make available digital currencies and digital tokens will have to seek the prior approval of the SC and register a disclosure document with the SC.
  2. Persons who deal in digital currencies and tokens as a business (which includes solicitation of investors) will also be subject to the licensing requirements under the CMSA.
  3. Digital exchanges will now have to be registered with the SC as a recognised market operator.

What’s next?

The Prescription Order issued by the Minister of Finance (“MoF”) is welcomed as it provides certainty to issuers and digital exchanges on how digital currencies and digital tokens are classified and regulated in Malaysia.

The SC is likely to issue guidelines relating to digital currencies and digital tokens in the near future. Offerors of the digital currencies and tokens and exchanges should be prepared to adhere to a more stringent regulatory environment, and investors may benefit from greater disclosures as a result of this change, in the near future.

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