Malaysia’s financial authority is actively engaging with the public to gather insights on its revamped regulatory approach for cryptocurrency exchanges, with the intent of fostering a competitive landscape while enhancing investor safety.
Engagement from the Securities Commission
Recently, the Securities Commission of Malaysia (SC) released a consultation document inviting input on proposed adjustments to the regulatory framework for Digital Asset Exchanges (DAX).
Since the establishment of the DAX framework in 2019, the Malaysian crypto landscape has evolved significantly. In 2022, trading volumes surged, reaching RM13.9 billion (approximately $3.31 billion), a remarkable increase compared to the previous year.
However, the SC has observed that regulated exchanges are grappling with stiff competition from unregulated alternatives that attract users with their diverse token selections and favorable pricing.
Currently, DAXs can only list digital assets that comply with the set minimum standards and receive prior authorization from the SC. The regulator also retains the authority to impose additional conditions on these exchanges.
Importantly, the existing market primarily caters to retail investors, while institutional involvement remains minimal, underscoring the need for DAX operators to facilitate secure access to digital asset investments for both sectors.
The SC sees a necessity for the industry to transition from being predominantly entrepreneur-driven to adopting a structure that encourages greater institutional involvement, thereby boosting market credibility.
“Enhancing the regulatory framework for DAXs is vital for the sustainable growth of digital assets in Malaysia. This reform is aimed at elevating our competitive edge, aligning with investors’ needs while ensuring robust protection measures, which are essential for instilling trust and confidence in our capital markets.”
Key Changes in the Reform
The SC anticipates that these reforms will spur broader investor participation and foster improved interplay between DAXs and the Malaysian capital market’s ecosystem. The consultation outlines significant proposed alterations, such as streamlining the asset listing process and reinforcing the standards for DAX operators.
Under the new proposal, digital assets that fulfill specific criteria set by the SC could be listed on regulated exchanges without the need for the regulator’s prior approval. This innovation aims to speed up the listing times, boost accountability, and broaden the range of products available.
Moreover, DAX operators will face more stringent governance and operational standards, including the segregation of client assets to bolster operational practices and manage associated risks effectively.
Additionally, new financial benchmarks will be established for crypto exchanges to ensure enhanced integrity and resilience, thereby increasing investor confidence in the marketplace.
This proposed reform emerges as part of broader initiatives by the Malaysian government to enhance competitiveness in the face of global markets. Prime Minister Datuk Seri Anwar Ibrahim recently highlighted the importance of updating the country’s financial regulations to address the evolving digital assets landscape.
According to reports, authorities are considering formulating a transparent regulatory framework to embrace cryptocurrency and blockchain technologies effectively within Malaysia.
Anwar has emphasized the necessity for Malaysian agencies, including the SC, Treasury, and Bank Negara Malaysia, to collaborate on regulatory strategies that ensure the local market remains relevant and that public interests are protected.
