Malaysia Bans ICOs, Issues Regulations For IEOs Instead

Bitcoinist January 16, 2020
Updated 2020/01/16 at 8:49 AM
3 Min Read

Financial regulators in Malaysia have published guidelines for crypto initial exchange offerings (IEOs). As part of the move, initial coin offerings (ICOs) by individual token issuers are no longer permitted in the country.

The Stage is Set for Regulated Crypto IEOs

According to Fintech Malaysia, the country’s Securities Commission (SC) published a set of guidelines for IEOs on Wednesday (January 15, 2019). In the new regulatory paradigm, crypto exchanges are now responsible for token sale events.

Thus, crypto exchanges will undertake due diligence assessments for token sales, evaluating token issuers in conjunction with the SC. Crypto exchanges registered as IEO operators must also maintain a minimum paid of capital equivalent to $1.2 million.

In addition to registering as IEO platforms, crypto exchanges looking to trade ICO tokens must also possess a Digital Asset Exchange (DAX) platform license. Back in February 2019, the SC introduced registration requirements for crypto exchanges in the country.

On the token issuer side, the SC mandates that they must hold incorporation documents in Malaysia with at least one director resident in the country. Token issuers must also have a minimum paid-up capital equivalent to $122,000.

The guidelines also include investment limit clauses with retail investors only allowed to put up a maximum of $500 in any token sale. This figure is significantly lower than the limit set for equity crowdfunding which currently stands at $1,200.

ICOs Now Illegal in Malaysia

In its press statement announcing the new guidelines, the SC promised to allow only tokens that meet strict assessment standards be allowed for sale in the country. According to the SC, the new guidelines will help regulators and IEO platforms determine if a crypto token possesses meaningful value proposition in terms of innovation or improvements to already existing market sectors.

With token sales now only possible via IEOs, ICOs are now illegal in the country. Malaysia now becomes one of the first jurisdictions to pursue regulated crypto token sales via registered exchange platforms. The SC also announced that the new regulatory paradigm for crypto token sale will come into effect after Q2 2020.

While Malaysia’s SC is moving towards legitimizing IEOs, the U.S. Securities and Exchange Commission (SEC) has come out to issue warnings about IEOs. According to the Commission, IEOs are as problematic as ICOs from a regulatory standpoint.

As previously reported by Bitcoinist, IEOs have performed as poorly as ICOs with data from BitMEX showing many failed projects.

What do you think about Malaysia’s financial regulator moving to legitimize crypto IEOs? Let us know in the comments below.

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