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Securities Commission Malaysia revises Guidelines on Exchange-traded Funds to facilitate offering of Digital Currency Exchange Traded Funds

06 April 2026

The Securities Commission Malaysia (“SC”) issued the 6th revision of the Guidelines on Exchange-traded Funds (“Guidelines”) which came into effect immediately upon its issuance on 2 March 2026.
 
The revisions to the Guidelines were made primarily to facilitate the offering of digital currency exchange-traded funds (“ETF”). In addition to housekeeping and editorial amendments, several amendments were made to enhance the clarity of certain requirements under the Guidelines.
 
This article highlights the salient amendments made to the Guidelines.
 
A.  Amendments relating to digital currency ETF
 
New definitions
 
The following definitions have been added to paragraph 2.01 of the Guidelines: 
  • “digital currency” which means a digital currency that is prescribed as securities under the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 20191; and 
  • “digital currency ETF” which means an ETF that invests in one or more digital currencies with the aim of providing investors with returns and tracks a benchmark which relates to one or more digital currencies. 
Key requirements of a digital currency ETF
 
A new Appendix V of the Guidelines sets out the key requirements of a digital currency ETF. These requirements are summarised below. 
  1. General: A digital currency ETF aims to track the performance of one or more digital currencies by tracking the benchmark which:
  1. is based on traded spot or cash market price of the digital currencies; and 
  2. reflects the price movements of the underlying digital currencies.
  1. Eligibility of digital currency: A digital currency ETF must invest primarily in digital currency that meets the following minimum criteria:
  1. the digital currency is not designed to enhance user or transaction confidentiality in a manner that materially impedes traceability, regulatory oversight or compliance with applicable anti-money laundering and counter-terrorism financing requirements; 
  2. the digital currency represents identifiable rights, benefits or utility; 
  3. the digital currency is sourced from a trading platform — (i) where the digital currency has demonstrated a track record of at least one year trading; and (ii) which complies with the Financial Action Task Force (“FATF”) recommendations, including such platform being registered, authorised, licensed or regulated by a regulatory authority having similar regulatory authority or function as the SC; 
  4. the digital currency exhibits sufficient liquidity to support orderly creation and redemption of ETF units; 
  5. the digital currency is well distributed and not over-concentrated; 
  6. information relating to the digital currency is widely available and readily accessible; 
  7. the security feature of the underlying distributed ledger is sound; and 
  8. the digital currency has viable and sustainable economic models. 
A new Guidance has been introduced to Part IV of the Guidelines to elaborate and provide further details on the requirements in paragraphs 2(d) to 2(h) of Appendix V. 
  1. Trading platform and counterparty: The management company must ensure that an investment in digital currencies is made via:
  1. a digital asset exchange that is registered with the SC; or 
  2. a trading platform or other counterparty outside Malaysia that — (i) is registered with, or is regulated by one or more laws of a foreign country giving effect to the FATF’s recommendations relating to virtual asset service provider; and (ii) has a risk-based Anti-Money Laundering, Countering the Financing of Terrorism and Countering Proliferation Financing (AMLCFT/PF) systems and controls that are supervised or monitored by a competent authority empowered by law to supervise and enforce AMLCFT/PF measures. 
Where an appointed market maker relies upon a trading platform or other counterparty outside Malaysia, the management company must ensure that the trading platform or other counterparty relied upon by the market maker also meets the requirements stipulated in paragraphs 3(b)(i) and 3(b)(ii) above.
 
  1. Exposure Limits: The value of the investment in digital currencies must be at least 95% of the digital currency ETF’s net asset value (“NAV”), with the remaining NAV being maintained for liquidity purposes.
Guidance to Paragraph 3.08(i)
 
The Guidance to Paragraph 3.08(i) of the Guidelines has been amended to include guidance on the minimum expectation for due diligence details to be included in the risk management policy and procedures documentation for a digital currency ETF.
 
Exemption from diversified index requirement
 
Paragraph 6.10(c) of the Guidelines imposes a requirement that the index that is tracked by an ETF be diversified such that the maximum weight per constituent does not exceed 20% of the index, and where an index is composed solely of constituents which are non-shares, the maximum weightage of only one constituent may be increased up to 35% of the index. Digital currency ETFs have been exempted from the diversified index requirement under paragraph 6.10(c) pursuant to a new paragraph 6.11(d).
 
B.  Other amendments
 
Exemption from single collective investment scheme limit
 
Paragraph 6.33 of the Guidelines prescribes that the value of an ETF’s investments in units or shares of any collective investment scheme (“CIS”) must not exceed 20% of the ETF’s NAV.
 
It has now been clarified that the exemption granted to feeder ETFs under paragraph 6.34(a) of the Guidelines from complying with the single CIS limit under paragraph 6.33 is not applicable to feeder ETFs that invest at least 85% of their NAV in units or shares of a single CIS.
 
Mandatory submission of preliminary application pack
 
In respect of applications to be submitted to the SC for the establishment, listing and quotation of units of an ETF on the Main Market of Bursa Malaysia Securities Berhad under section 212 of the Capital Markets and Services Act 2007 pursuant to paragraph 14.01(a) of the Guidelines, a new paragraph 14.01A now requires a preliminary application pack (in the form and content prescribed by the SC, as specified on its website) to be submitted to the SC at least one month prior to the submission of the application.
 
New or higher risk investments
 
A new paragraph 14.07 of the Guidelines sets out the following timelines for a management company to submit the risk management policy and procedures2 to the SC when an ETF intends to undertake activities or invest in assets which give rise to new or higher risk investments: 
  1. existing ETF, at least one month before commencing such activities or investments; or 
  2. a proposal under paragraph 14.01(a) of the Guidelines to establish and list an ETF, together with the preliminary application pack. 
A new Guidance to paragraph 4.07 of the Guidelines clarifies that the activities or investments envisaged by the SC giving rise to new or higher risk investments are as follows: 
  1. investment in derivatives (other than for the sole purpose of hedging); 
  2. undertaking securities lending activity; 
  3. undertaking sale and repurchase transactions; 
  4. undertaking reverse repurchase transactions; and 
  5. investment in digital currencies, including feeder digital currency ETFs, involving in-kind primary market creation and/or redemption conducted at both the underlying target fund level and the feeder fund level, as applicable. 
Additional criterion for Commodity ETF
 
The criteria for a “Commodity ETF” in paragraph 1 of Appendix III of the Guidelines have been amended to include an additional requirement that the benchmark which is being tracked reflects the price movements of the underlying physical commodity.
 
Bursa Malaysia’s Consultation Paper
 
Following closely on the revision of the Guidelines, Bursa Malaysia Berhad (“Exchange”) issued Consultation Paper No. 1/2026 on 13 March 2026 seeking public feedback on proposed amendments to the Main Market Listing Requirements and the Directives of Bursa Malaysia Securities Berhad to facilitate the listing and trading of digital currency ETFs. The Consultation Paper can be accessed here.3
 
Comments
 
With the additional requirements for the issue of digital currency ETFs now incorporated into the Guidelines and with the Exchange having unveiled the requirements for the listing and trading of digital currency ETFs, it will not be long before digital currency ETFs make their debut on the Exchange.
 
The launch of digital currency ETFs will enable less technology savvy investors to invest in digital assets without the need to deal with the intricacies of a digital wallet and worse, the trauma of losing or forgetting the private key to their digital wallet.
 
 
Article by Phua Pao Yii (Partner), Tan Wei Liang (Partner) and Kok Chee Kheong (Consultant) of the Corporate Practice of Skrine.
 
 
 
1 P.U.(A) 12/2019 as amended by P.U.(A) 6/2025.
2 Paragraph 3.08(i) of the Guidelines, inter alia, requires a management company to establish, implement and maintain risk management policy and procedures of the ETF in a standalone document to monitor, measure and manage risks of the investment positions of the ETF and their overall contributions to the risk profile of the ETF.
3 The last day for providing comments on the Exchange’s Consultation Paper No. 1/2026 is 10 April 2026.

This article/alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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