Malaysia has proposed amendments to its regulatory framework for digital asset exchanges that would ease the listing process for exchanges but tighten the custody and governance requirements.
Securities Commission Malaysia (SC) recently published a consultation paper requesting public feedback on the proposed changes.
“The proposals aim to enhance competitiveness of Malaysia’s regulated digital asset market, improve investor protection and strengthen the resilience and integrity of DAX operators,” the watchdog says.
Under its “same activities, same risks, same regulatory outcomes” approach, the SC proposes liberalizing the listing process for exchanges to encourage a more competitive market.
While exchanges will be fully accountable for the assets they list, these assets must have undergone a public security audit and been traded for at least a year on a registered virtual asset service provider (VASP).
Additionally, the regulator is weighing whether to impose extra requirements for assets with enhanced anonymity features like Monero. Some countries, like South Korea, banned the trading of privacy coins years ago. Australia followed suit, with the European Union set to enforce similar restrictions in 2027.
SC is also mulling restrictions on memecoins, which have become a $60 billion market. It believes these tokens face “a heightened risk of market volatility and market manipulation.”
Stablecoins and tokens issued by exchanges to be used within their ecosystem also pose unique challenges, and the watchdog wants public feedback on whether it should impose more stringent regulations on them.
SC doubles down on segregation of assets
While it plans to relax listing rules, the regulator is ramping up its investor protection guidelines on asset segregation and governance.
Under the proposed framework, VASPs must hold at least 90% of investor assets in cold wallets for each type of asset they hold. Assets held on hot wallets must be fully collateralized with assets held in the VASP’s own offline wallet.
Malaysian VASPs that serve other jurisdictions must retain a separation between local and offshore assets, the watchdog adds. This requirement has been implemented in other countries to great success. In Japan, for instance, the segregation of local assets allowed FTX Japan to refund its users when the global parent company went down in late 2022.
The regulator also wants VASPs to enhance their governance, starting with regular audits on the segregation of investor assets. The operators must also prove that they maintain direct access to the wallets, free from influence or control by external parties. They must appoint a senior executive who needs to reside in Malaysia to administer this access.
These new regulations seek to protect Malaysians from ‘crypto’ scammers who continue to make away with billions of dollars every year. The largest scam in the country, UVKXE, blew up earlier this year, going down with RM33 million ($7 million) in local investors’ funds.
Globally, criminals stole $2.3 billion in digital assets according to a report by CertiK, which cited reported on-chain incidents. A separate report by Nefture Security estimated the losses at $8.3 billion in at least 519 incidents.
The SC’s public consultation ends on August 11.
Connecticut bans state agencies from holding ‘crypto’
While dozens of states in the United States rush to set up digital asset reserves to align with President Donald Trump’s initiative, Connecticut has bucked the trend, banning state agencies from holding digital assets.
Gov. Ned Lamont signed House Bill 7082 into law after it sailed through the state’s Senate and House of Representatives with 36 and 148 votes respectively, and zero votes against.
The bill “prohibits the state, and political subdivisions of the state, from accepting or requiring payment in the form of virtual currency, or purchasing, holding, investing in or establishing a reserve of virtual currency.”
The Constitution State holds just under $9 billion in treasury pools across its short-term investment fund and the budget reserve fund. With a $366 billion economy, it ranks 23rd in the country.
Connecticut is the first state to push back against the BTC reserve wave that has swept across the U.S. On the opposite end, New Hampshire was the pioneer, passing House Bill 302, which allows its treasurer to allocate up to 5% of the state funds in digital assets.
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Source: https://coingeek.com/malaysia-to-ease-crypto-listing-connecticut-thwarts-reserve/