Beware Of Unauthorised Initial Coin Offerings and Digital Asset Exchanges

The Securities Commission Malaysia (SC) has noted an 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. The SC has not
authorised any ICOs pending the finalisation of its guidelines.

Any offering of digital assets as well as its associated activities such as marketing or
inducing others to subscribe to an ICO will require authorisation from the SC. 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 15 January 2019.

The SC would like to remind investors to be mindful of the potential risks associated
with ICO schemes, notably:

(i) 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;
(ii) the involvement of unauthorised individuals heightens the risk and exposure
to fraud, money laundering and terrorism financing;
(iii) the ICO may be structured in such a way as to limit the legal protection and
recourse for the investors against an ICO issuer; and
(iv) cyber-security risks including hacking and stealing of online personal
information.

The SC is also urging investors to be cautious when considering to buy or sell 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 4th June 2019, the SC has registered three Recognized Market Operators (RMOs)
to establish and operate DAX in Malaysia. These three DAX operators, namely Luno
Malaysia Sdn Bhd, SINEGY Technologies (M) Sdn Bhd, 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 under the SC’s initial transitional period list.

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

Members of the public may verify if a digital asset operator is registered with the SC
at https://www.sc.com.my/development/digital/digitalasset

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