It is laudable that the Securities Commission Malaysia (SC) has acted swiftly against a promoter of an Initial Coin Offering (ICO) in the larger public interest recently. This follows a noticeable upswing in activities by new ICOs to solicit investments in cryptocurrencies from the Malaysian public.
On Jan 9, the SC directed Singapore-registered CopyCash Foundation to immediately cease and desist all its proposed activities, including a plan to launch an ICO on Jan 10, in Malaysia.
The directive was issued by the SC following its inquiry after finding there is a reasonable likelihood that disclosures in CopyCash Foundation’s white paper and representations to potential investors will contravene relevant requirements under securities laws.
The SC noted the ICO operator had organised talks and seminars in major cities, including Penang and Kuala Lumpur. The regulator had earlier said it was calling in key officers of the foundation to inquire into its activities.
However, CopyCash Foundation is not the first such ICO to be introduced in the country and certainly won’t be the last. Ecobit and HelloGold are among the ICOs which had grabbed interest among the local investing community.
The SC has reminded the public to seek legal or professional advice if they are in doubt about the applicable legal and regulatory requirements pertaining to such ICOs. It has also warned investors to be mindful of the potential risks involved in ICOs and investment arrangements involving digital tokens.
Given the complexity of such schemes to the laymen, especially mom-and-pop investors and senior citizens, the SC’s warning and directive against CopyCash Foundation are timely.
It will invariably require much legwork but investors need to understand such digital offerings and find out more about the underlying projects, business and assets of the operator and the schemes.
Given that ICOs operate online and are usually not regulated, investors should be wary of being exposed to heightened risks of fraud. On the other hand, financial regulators like the SC, Bank Negara Malaysia and other enforcement agencies need to be constantly vigilant and closely monitor such ICO-related activities and take action where necessary.
The regulators also need to come up with the necessary policies, guidelines and regulatory framework to govern legitimate ICOs and the use of cryptocurrencies.
