SC cautions investors against unauthorised ICOs

In a statement, the SC said that it has not authorised any ICOs pending the finalisation of its guidelines.

PETALING JAYA: The Securities Commission (SC) has noted the increase in the number of queries and complaints from members of the public regarding initial coin offerings (ICOs) and digital asset exchanges (DAX).

The SC advises the public to be wary of any persons offering ICOs.

In a statement, the SC said that it has not authorised any ICOs pending the finalisation of its guidelines.

“Any offerings of digital assets as well as its associated activities such as marketing or inducing others to subscribe to an ICO would require authorisation from the SC,” it said.

This follows the coming into force of the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 (Prescription Order) on Jan 15, 2019. The most popular of all cryptocurrencies, bitcoin, was trading at US$11,746 as at press time. It is up some 230% so far this year, falling from its recent high of US$13,880 per bitcoin to trade as low as US$9,610 in the last few days.

Bitcoin had an epic run in 2017, with euphoria sending the cryptocurrency from under US$1,000 per bitcoin to almost US$20,000 in less than a year.

The SC reminds investors to be mindful of the potential risks associated with ICO schemes. For instance, an ICO issuer not having a physical presence in Malaysia would make it difficult to verify the authenticity of the ICO. Further, the recovery of invested monies may be subject to foreign laws or regulations.

Secondly, the involvement of unauthorised individuals heightens the risk and exposure to fraud, money laundering and terrorism financing.

Thirdly, the ICO may be structured in such a way as to limit the legal protection and recourse for the investors against an ICO issuer. Lastly, there are also cyber-security risks that include hacking and stealing of online personal information.

The SC also urges investors to be cautious when considering buying or selling digital assets through trading platforms. Even though a platform may call itself an ‘exchange,’ it does not mean it has been authorised by the SC.

As of June 4, the SC had registered three recognised market operators to establish and operate DAX in Malaysia. These three DAX operators, namely, Luno Malaysia Sdn Bhd, SINEGY Technologies (M) Sdn Bhd and Tokenize Technology (M) Sdn Bhd, have been given nine months to fully comply with all regulatory requirements.

“Apart from the three operators mentioned above, no other online platforms are permitted to establish and operate a DAX in Malaysia currently. As such, all other DAX operators are required to immediately cease all activities related to the trading of digital assets and return all monies and assets collected from investors.” This also applies to operators who were on the SC’s initial transitional period list.

The SC warns that operating a DAX or launching or marketing an ICO without authorisation from the SC is an offence under securities laws. The persons in breach may be liable to a fine or imprisonment term not exceeding ten years or both.

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