Malaysia Proposes New Crypto Listing Rules to Boost Market

The Securities Commission Malaysia (SC) has proposed a significant change to its regulatory framework for cryptocurrency listings. The regulator is seeking public feedback on a new proposal that would allow cryptocurrency exchanges to list certain digital assets without first obtaining explicit approval from the SC. This move aims to accelerate the time-to-market for new digital assets, increase the accountability of crypto exchange operators, and widen the range of products available to investors.

Under the proposed rules, digital assets that meet specific criteria could be listed without the need for prior regulatory approval. These criteria include the requirement that the digital assets must have undergone security audits with publicly available results and must have been traded for at least one year on a platform compliant with the Financial Action Task Force (FATF) standards. The exchange would be held accountable for its decision to list a specific asset, ensuring that only assets meeting these stringent criteria are made available to investors.

The SC is also seeking industry input on whether certain types of higher-risk assets should be permitted for trading. These include privacy coins such as Monero (XMR), which feature heightened privacy in their design and may appeal to individuals involved in unlawful conduct, potentially increasing the risk of money laundering and terrorism financing. Additionally, the regulator is seeking comments on assets intended to follow internet trends or popular culture, commonly known as memecoins, due to their heightened volatility. The SC is also considering assets with low market demand, such as nascent utility tokens, due to their higher risk.

In addition to the proposed changes to the listing process, the SC has also proposed a reworking of the requirements for client asset security and governance. Digital exchange operators would be subject to more stringent rules, including requirements for the segregation of user assets. Crypto exchanges would also need to meet new minimum financial criteria, including policies and procedures to mitigate the risk of loss or misuse of user funds and to facilitate repayment in the event of insolvency. Under the new rules, those institutions would also be required to identify a senior management member residing in Malaysia to be responsible for the administration of the wallets. This would relate to mitigating the risk of loss or misuse of customers’ assets and facilitating the movement of digital assets.

Finally, crypto exchanges that custody user assets would be required to register as digital asset custodians or to engage a custodian registered with the SC to provide its services. This move is aimed at enhancing the security and transparency of the cryptocurrency market in Malaysia, providing investors with greater confidence in the digital assets they trade. The proposed changes reflect the SC's commitment to fostering innovation in the cryptocurrency sector while ensuring that appropriate regulatory safeguards are in place to protect investors and maintain the integrity of the market.