Proposes Plans for Digital Securities in Malaysia's Capital Market
Malaysia's Securities Commission (SC) has proposed a regulatory framework for tokenized capital market products, aiming to promote responsible innovation while ensuring investors' interests are not compromised. The consultation period for this framework ends on June 16, 2025.
The proposed framework distinguishes between tokenized securities and cryptocurrencies and utility tokens. It primarily focuses on digital twin tokens and digital securities, each with specific treatment reflecting their legal and functional nature.
Digital twin tokens are digital representations that mirror an existing traditional security but do not confer rights or ownership unless linked and recognized as such under conventional law. They are used for processes like settlement, transfer, or compliance automation and are considered secondary to the underlying securities.
On the other hand, digital securities are blockchain-based tokens that represent ownership or interests in capital market products, carrying legal rights similar to traditional securities. They are treated as capital market products under the SC's regulatory purview and must comply with the same rules applicable to securities offerings, including registration, disclosure, and ongoing compliance obligations.
The framework establishes a clear definition and scope for tokenized capital market products, including both digital securities and digital twin tokens. It sets regulatory requirements for issuers and intermediaries offering tokenized securities, ensuring investor protection through Know Your Customer (KYC), Anti-Money Laundering (AML), and disclosure standards.
The SC's Proposed Regulatory Framework for Offering and Dealing in Tokenised Capital Market Products also includes licensing regimes for market operators such as digital asset exchanges under the Recognised Market Operator (RMO) framework. This focus is on governance, due diligence, and time-to-market efficiencies.
Compliance harmonization is achieved through automated smart contracts embedded in tokenization platforms to execute functions like dividend distribution, ownership transfer, and real-time compliance checks. The framework also recognizes the functional liquidity provision role of stablecoins as a facilitating mechanism within the tokenized capital markets system.
This approach reflects the Malaysian regulatory evolution embracing blockchain innovation while anchoring digital securities firmly within the established capital market legal framework. It enables streamlined issuance, trading, and custody while mitigating risks traditionally associated with unregulated digital assets. The aim is to support Malaysian SMEs and broader market participation by providing clear pathways for issuer compliance and investor protections aligned with global standards.
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- The proposed framework for tokenized capital market products in Malaysia, ending on June 16, 2025, distinguishes between digital twin tokens and digital securities, with each having specific treatments based on their legal and functional natures.
- Digital securities, similar to traditional securities, are blockchain-based tokens representing ownership or interests in capital market products and are treated as capital market products under the Securities Commission's (SC) regulatory purview.
- Digital twin tokens are digital representations that mirror traditional securities but do not confer rights or ownership unless linked and recognized under conventional law, and are primarily used for processes like settlement, transfer, or compliance automation.
- The SC's framework includes licensing regimes for market operators such as digital asset exchanges, focusing on governance, due diligence, and time-to-market efficiencies.
- The framework establishes regulatory requirements for issuers and intermediaries offering tokenized securities, ensuring investor protection through Know Your Customer (KYC), Anti-Money Laundering (AML), and disclosure standards. (Source 4 seems to be missing)
