In his opening address at the two-day SCxSC Fintech Summit 2024 (“
Fintech Summit”), Dato’ Mohammad Faiz Azmi, the Chairman of the Securities Commission Malaysia (“
SC”) announced that the SC will launch three new initiatives to spur innovation while maintaining investor protection.
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The three initiatives are:
The Sandbox
The Sandbox will provide a controlled environment for testing innovative products and services while ensuring investor protection. It will be a regulatory tool for enhancing policies to ensure they are fit for purpose. The eligibility criteria for the Sandbox will include the offering of innovative capital market products or services that are not currently available in Malaysia and do not fully fit under the existing regulatory framework, that bring value to the market. By way of example, the SC may allow innovative tokenised offerings to be tested within the Sandbox.
A cohort-based approach will be adopted for participation in the Sandbox. Applications for the first cohort is open until April 2025. Corporations that intend to apply for the first cohort are required to participate in pre-consultation sessions prior to the submission of applications. Pre-consultation sessions are available immediately. Interested parties may begin engagements by emailing the SC at afinity@seccom.com.my.
A successful applicant will have up to 12 months to test its products or services in the Sandbox.
Enhancing regulatory framework for tokenisation
In relation to the second initiative to enhance its regulatory framework, the SC has announced that it will develop a guidance on tokenisation in early 2025 to assist intermediaries to understand and manage associated risks relating to securities tokenisation.
Issuance of tokenised bond
The SC is collaborating with Khazanah Nasional Berhad, as a potential issuer, to explore how blockchain technology can enhance the efficiency of bond issuance and operations. This initiative will explore the use of smart contracts and custodial arrangements.
Comments
The initiatives announced by the SC at the Fintech Summit are interesting developments in the securities landscape in Malaysia.
The Sandbox will serve a similar purpose as the Financial Technology Regulatory Sandbox established by Bank Negara Malaysia some time ago as a testbed for financial services, such as banking, Islamic finance, insurance and takaful services, that are not related to securities.
It is clear from the second and third initiatives that the SC has identified securities tokenisation using blockchain technology and smart contracts as an alternative to plain vanilla securities offerings.
Article by Lee Ai Hsian (Partner) of the Fintech Practice of Skrine.