PETALING JAYA: Malaysian regulators are looking to clamp down on initial coin offerings or ICOs by expanding the definition of ‘securities’ in existing laws, sources said.
ICOs are fund raising activities by tech start up firms which sell investors digital tokens in exchange for cryptocurrencies such as bitcoin and ether. A number of countries such as the US and Singapore have taken the stand that most ICOs will fall under their existing securities laws although it is left to be seen if promoters of ICOs could challenge that considering that ICOs are a new form of fund raising.
In July, the US’ Securities and Exchange Commission (SEC) ruled that some of the “coins” for sale are actually securities—and are subject to the agency’s regulation.
However other countries like the Philippines have said that they are in the process of tweaking their definitions of “securities” so that ICOs will be subject to existing laws.
Malaysia maybe the first among these markets to do so, sources said.
Nearly US$3.6bil has been raised to date via hundreds of ICOs, with the large majority of that taking place in the first half of 2017.
However many commentators have voiced out that many of the ICOs are either fraudulent or at least based on untested or unsound projects.
A handful of ICOs have originated in Malaysia or are involving Malaysians with more being planned.
Last Friday, a new division of the Securities and Exchange Commission (SEC) of the US dedicated to ICOs filed its first charges, targeting a scam that reportedly raised US$15mil from thousands of investors by promising a 13-fold profit in less than a month, Forbes reported.
The unit filed a criminal complaint against the promoter who sold digital tokens known as “PlexCoins” as part of a purported plan “to increase access to cryptocurrency services” across the world. Forbes reported that the SEC considered the token sale a “blatant rip-off”.
Last month the Securities Commission of Malaysia (SC) said it is working closely with Bank Negara Malaysia to release a cryptocurrency framework for the country within three months.
To be noted is the fact that the SC has created a number of legalised avenues which would serve the fundraising needs of small tech firms, including equity crowdfunding, peer to peer lending and the Leading Entrepreneur Accelerator Platform (Leap) Market.
Limited time offer:
Just RM5 per month.
