SC opens up for more crypto exchanges

LAST week, the Securities Commission Malaysia unveiled 4 new initiatives to additional liberalise the capital market and permit micro, small and medium enterprises in addition to mid-tier corporations higher entry to funding to develop their companies.

One of those initiatives is the opening of registration for new “recognised market operators-digital asset alternate”, or RMO-DAX, to facilitate regulated digital asset investments.

“As funding in various belongings is turning into more prevalent, the SC continues to advertise accountable innovation inside the digital asset house, whereas guaranteeing satisfactory safety of the pursuits of buyers. This initiative permits buyers to speculate through regulated avenues and facilitates the entry of platforms with differentiated worth propositions,” the SC mentioned in an Oct 31 assertion.

The transfer got here as a shock to many, given what number of nations have turned much less pleasant in direction of cryptocurrency buying and selling as a result of its risky and speculative nature, after the multi-billion greenback crypto rout earlier this 12 months following rate of interest hikes within the US that had prompted buyers to stroll away from riskier belongings.

A working example is Singapore, which aspired to be a world cryptocurrency hub, however is not pleasant in direction of cryptocurrency buying and selling, after many retail buyers misplaced their financial savings to such buying and selling. The Monetary Authority of Singapore’s managing director Ravi Menon reportedly mentioned on Thursday that Singapore nonetheless desires to be a crypto hub if it entails experimenting with programmable cash and making use of digital belongings for use circumstances or tokenising monetary belongings to extend effectivity and cut back dangers in transactions.

“But whether it is about buying and selling and speculating in cryptocurrencies, that isn’t the type of crypto hub we wish to be,” Menon was quoted as saying. MAS has additionally warned that cryptocurrency buying and selling is “extremely dangerous and never appropriate for most of the people” as a result of its risky and speculative nature, and banned crypto promoting in public areas and on social media in January 2021. Singapore reportedly obtained about 180 functions from crypto corporations for cost licences in 2020, however has given out 24 licences to this point.

In Thailand, the federal government has introduced plans to tighten supervision of digital-asset corporations in July after a cryptocurrency sell-off saddled retail buyers with massive losses. The announcement got here after Bangkok-based alternate, Zipmex, halted withdrawals and is looking for a bailout from some buyers. Thailand’s Securities and Exchange Commission is now seeking to amend present digital-asset laws, which had been authorized in 2018, to incorporate stricter {qualifications} for administration and licensing of crypto custodians.

Back in Malaysia, the announcement to open up for more DAX operators got here slightly over a 12 months after the SC banned the world’s largest cryptocurrency alternate, Binance, from working right here in July final 12 months for illegally working a DAX.

SC chairman Datuk Seri Awang Adek Hussin instructed reporters on Oct 31 that “digitalisation of the market is a key precedence for the SC in order that market members are capable of adapt to digital developments and use applied sciences that can promote innovation with new enterprise fashions and services or products together with broadening entry to market-based financing in a more environment friendly method.”

When requested if the SC is now going to permit Binance, which has a day by day turnover of US$76 billion (RM360 billion), to function in Malaysia, Awang Adek mentioned the alternate might want to apply for a licence. “Binance is already collaborating in present native digital exchanges though their share is comparatively small. So in the event that they wish to are available, we have now to judge what is going to occur to the prevailing partnership within the nation,” Awang Adek mentioned.

There are presently 4 SC-registered DAXs within the nation: Luno Malaysia Sdn Bhd, MX Global Sdn Bhd, SINEGY DAX Sdn Bhd and Tokenize Technology (M) Sdn Bhd.

In March, MX Global Sdn Bhd — led by Datuk Fadzli Shah, the brother of e-commerce FashionValet co-founder Datuk Fadzarudin Shah Anuar — introduced that Binance and Cuscapi Bhd had invested within the firm. It additionally introduced that Binance has made an fairness funding within the group, whereas Cuscapi has subscribed for redeemable convertible desire shares (RCPS).

While MX Global didn’t disclose the quantity of Binance’s fairness funding within the group, Cuscapi, revealed in a bourse submitting that it had invested RM9 million in MX Global by subscribing to 9 million RCPS at RM1 per share.

When requested if Binance is taken with making use of for a licence to function in Malaysia, its head of Asia-Pacific Leon Foong tells The Edge: “We don’t touch upon particular processes. What we are able to say is that we’ll at all times respect native laws and make sure that we stay compliant within the case of any market entry.”

Apart from Malaysia, MAS in December final 12 months ordered Binance Singapore to cease all crypto transfers with the worldwide alternate binance.com, which the regulator had positioned on an investor alert record.

Growing demand amongst youthful buyers

As to why the SC is now open to more cryptocurrency investments in Malaysia, Awang Adek mentioned the regulator wanted the time to check the danger of digital belongings funding. “In SC, the whole lot new we have now to be actually cautious. We must guarantee that we don’t open our market to one thing that can create issues. While we had been reluctant to do this initially, the demand for [digital assets] has at all times been there.

“If we don’t approve and regulate this house, transactions … will probably be accomplished exterior of our regulation and unregulated parameters, that will probably be more tough for us,” he mentioned.

He additionally highlighted that the demand for digital belongings has been rising in Malaysia, particularly amongst youthful buyers.

“At least in the event that they function inside a regulated house, we all know what number of gamers there are, how a lot their investments are, so we will probably be more comfy with the state of affairs as we are able to monitor them, slightly than not figuring out what is going on on the market.

“We know there are at all times individuals who wish to put money into digital belongings. This digital belongings world will stick with us whether or not we prefer it or not,” he mentioned.

According to the SC’s 2021 Annual Report, a complete of RM21 billion in digital belongings traded throughout all registered DAX. And there are about 760,000 accounts registered in 2021, 4 occasions the 190,000 accounts recorded in 2020. Investors aged under 35 years outdated comprised the most important phase at 62%, holding more than 470,000 accounts as at finish 2021.

“The complete quantity of funding in digital belongings will not be large enough to fret us (but), it’s nothing just like the inventory alternate. Whereas in some nations it may be up to 50% of the inventory alternate.

“So we’re not apprehensive concerning the dangers. Of course in each funding the buyers must tackle the danger if the worth of the cryptocurrencies goes down,” Awang Adek added.