The Securities Commission Malaysia (SC) has issued a caution to investors against backing unauthorised initial coin offerings (ICO) and digital asset exchanges (DAX).
An increase in the number of queries and complaints have been given to the SC regarding ICOs and DAX. The SC has warned the public to be wary of anyone offering ICOs – no ICOs have been authorised as of yet, while the regulator finalises its guidelines.
Any digital asset offering and the associated activities, such as marketing or subscriptions, will require the authorisation of the SC.
Investors are reminded that an ICO issuer that does not have a presence in Malaysia would make it tough to verify the authenticity. It would also make it tough to recover any invested money as it would be subject to foreign laws and regulations.
Involvement in unauthorised ICO has a heightened risk and larger exposure to fraud, money laundering and terrorism financing, the SC said. Furthermore, the ICO could be structured in a manner which limits the legal protection and recourse for investors against the ICO issuer.
Cybersecurity risks also pose a threat to investors, with an unauthorised ICO leaving open the potential for hacking and the stealing of online personal information.
The SC has also cautioned investors on the buying and selling of digital assets via trading platforms.
Currently, there are only three registered exchanges in the country: Luno Malaysia, SINEGY Technologies, and Tokenize Technology. These companies have been given nine months to fully comply with regulatory requirements.
No other online platform has been permitted by the regulator to operate a DAX in Malaysia. Any company currently doing so without authorisation must cease all activities related to trading digital assets and must return all funds.
The SC said, “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.”
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