Don’t be duped by illegal initial coin offerings, warns SC

The Securities Commisions notes an increase in the number of queries and complaints from members of the public regarding initial coin offerings and digital asset exchanges.

KUALA LUMPUR: The Securities Commission today advised people against being cheated by participating in unauthorised initial coin offerings (ICOs) and digital asset exchanges (DAX).

In a statement today, it said there was an increase in the number of queries and complaints from members of the public regarding ICOs and DAX.

“The SC advises the public to be wary of any person offering ICOs. The SC has not authorised any ICOs pending the finalisation of its guidelines.”

It said any offering 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.

This is stated in the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 (Prescription Order) dated Jan 15, 2019.

It listed the following risks relating to ICO schemes:

(i) An ICO issuer not having a physical presence in Malaysia would make it difficult to verify the authenticity of the ICO and the recovery of invested money 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 also advised 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.”

The SC said as of today, it had registered three recognised market operators (RMOs) to establish and operate DAX in Malaysia.

They are Luno Malaysia Sdn Bhd, Sinegy Technologies (M) Sdn Bhd, and Tokenize Technology (M) Sdn Bhd. The SC said they had been given nine months to fully comply with all regulatory requirements.

It said, apart from these three, no other online platform had been permitted to establish or operate a DAX in Malaysia for now.

“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.”

The SC noted that operating a DAX or launching or marketing an ICO without authorisation from the SC was an offence under securities laws. Persons in breach may be liable to a fine or imprisonment term not exceeding 10 years or both.

It urged the public to verify if a digital asset operator was registered with the SC at: https://www.sc.com.my/development/digital/digitalassets.