Malaysia's SC 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 would be eligible for listing without prior regulatory approval. These criteria include the requirement that the digital assets have undergone security audits with publicly available results and 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 like Monero (XMR), which offer enhanced privacy features that could potentially be exploited for unlawful activities such as money laundering and terrorism financing. The regulator is also considering the inclusion of memecoins, which are known for their heightened volatility, as well as stablecoins, tokenized assets, and exchange tokens, which may present conflicts of interest. Additionally, the SC is asking for comments on assets with low market demand, such as nascent utility tokens, due to their higher risk profile.

In addition to the proposed changes to the listing process, the SC is also tightening governance and custody rules for digital exchange operators. Under the new requirements, exchanges would be subject to more stringent rules for client asset security and governance. This includes the segregation of user assets and the implementation of policies and procedures to mitigate the risk of loss or misuse of user funds. Exchanges would also need to meet new minimum financial criteria and identify a senior management member residing in Malaysia to be responsible for the administration of the wallets. Furthermore, crypto exchanges that custody user assets would be required to register as a digital asset custodian or engage a custodian registered with the SC to provide its services.

The proposed changes by the SC reflect a broader trend towards regulatory liberalization in the cryptocurrency space, aimed at fostering innovation while ensuring investor protection. By allowing exchanges to list digital assets without prior approval, the SC hopes to create a more dynamic and competitive market for digital assets in Malaysia. However, the regulator is also taking steps to ensure that only assets meeting stringent criteria are made available to investors, and that exchanges are held accountable for their decisions. The proposed changes are part of a broader effort by the SC to create a more robust and transparent regulatory framework for the cryptocurrency industry in Malaysia.