Malaysian regulator proposes easing crypto asset listing process

The Securities Commission Malaysia (SC) is seeking public feedback on a proposal that could allow cryptocurrency exchanges to list certain digital assets without first obtaining explicit approval from the regulator.

According to a Monday announcement, the regulator is considering liberalizing the framework for listing digital assets on exchanges. Under the newly proposed rules, digital assets meeting specific criteria would be allowed for listing without explicit approval.

“This aims to accelerate time-to-market, increase [crypto exchange] operator accountability and widen product offerings,” the announcement states.

The new rules would hold the exchange accountable for its decision to list a specific asset. The listed digital assets must have undergone security audits with publicly available results, and they must have been traded for at least one year on a Financial Action Task Force-compliant platform.

Malaysia’s Securities Commission’s consultation paper. Source: Securities CommissionRelated: Malaysia launches Digital Asset Hub to test stablecoin, programmable money

Which assets may be approved?

The SC is seeking industry input on whether certain types of assets, which it views as higher risk, should be permitted for trading. Those include privacy coins such as Monero (XMR), which feature heightened privacy in their design:

“The lack of transparency aspect in certain digital assets appeal to individuals involved in unlawful conduct which may result in the increased risk of money laundering and terrorism financing.”

Other kinds of assets that the regulator is asking for comments on are those “intended to follow internet trends or popular culture,” more commonly known as memecoins. In this case, the issue is heightened volatility.

Stablecoins and tokenized assets are also cited alongside exchange tokens with their alleged conflict of interest. The regulator is seeking input on assets with low market demand, such as “nascent utility tokens,” due to their higher risk.

Related: Illegal crypto mining surges in Malaysia amid unclear policies

Governance and custody rules tightened

The SC also proposed a rework 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 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 movement of digital assets.”

Lastly, 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.

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