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Malaysia may not be clear where it stands on cryptocurrencies, but the country’s securities watchdogs now have the power to regulate certain digital assets and crypto exchanges. Malaysia’s Securities Commission (SC) announced yesterday that token offerings and exchanges will now require approval from the commission in order to launch operations, adding that the entities will also be obligated to comply with the country’s securities laws.

The new policies are part of the SC’s Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019. It became effective as of this morning, and Malaysia’s Finance Minister, Lim Guan Eng, was quoted by The Star Online as saying that any individual or entity that introduces an initial coin offering (ICO) or that operates a crypto exchange without the commission’s approval, “may be punished, on conviction, with imprisonment not exceeding 10 years and fine not exceeding 10 million Malaysian ringgits [$2.44 million].”

The SC is preparing to collaborate with the country’s central bank, Bank Negara Malaysia, in an effort to produce a legal framework for the digital asset space. Those guidelines should be ready before the end of the present quarter. The commission adds, “The guidelines will among others, establish criteria for determining fit and properness of issuers and exchange operators, disclosure standards and best practices in price discovery, trading rules and client asset protection.”

All entities involved in the digital asset industry must comply with counter-terrorism financing and anti-money laundering policies, as well as “cyber security and business continuity measures.” Lim points out, “In particular, we believe digital assets have a role to play as an alternative fundraising avenue for entrepreneurs and new businesses, and an alternate asset class for investors.”

The SC and the central bank issued a joint statement last month, explaining that the new guidelines are designed to bring digital assets “within the remit of securities laws to promote fair and orderly trading and ensure investor protection.” However, there is still some confusion regarding the regulatory status of digital currencies. This past Saturday, the country’s territories minister, Khalid Abdul Samad, told the New Straits Times, “People have asked me if [cryptocurrency and digital currency] are legal or illegal. At the moment, the answer is neither legal nor illegal as the situation is still unclear.”

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