KUALA LUMPUR: The regulations for digital asset or cryptocurrency exchanges and initial coin offerings (ICOs) will come into force by first quarter of 2019, says Finance Minister Lim Guan Eng.

He said on Wednesday the Securities Commission (SC) had given him an update that the regulations would be part of the SC's efforts to facilitate alternative fundraising avenues and new investment asset classes. 

“While some parties might still be sceptical of this space, there can be no doubt that we need appropriate regulations to be put in place and enforced to safeguard the interest of investors,” he said, when delivering the keynote address at the FinTech Conference 2018 organised by the SC.

He also reiterated his statement in Parliament that interested parties must work within the framework set up by Bank Negara Malaysia and the SC.

“Both Bank Negara and the SC, in terms of formulating this framework will be under the auspices of the Finance Ministry. The Finance Ministry will lead the committee comprising of Bank Negara, the SC, and the MOF itself,” it said.

Lim also said as part of the government’s commitment to support high potential and innovative MSMEs, “we are keen on the continued development of such alternative financing avenues for these businesses beyond the traditional channels of financing”. 

The government had provided allocation for a co-investment fund for equity crowdfunding (ECF) and peer-to-peer financing (P2P) platforms.

The Co-Investment Fund (CIF) worth RM50mil will match investments from private investors on a one to four basis, that is. RM1 from government and RM4 from private funds. 

This mechanism leverages on the collective wisdom of the crowd, instead of a bank's investment committee or the committee of a fund administered by the government, to support MSMEs which have gained validation from private investors.

“Through this, we hope to be able achieve faster fund disbursements to support a broader range of deserving MSMEs, as well as provide greater transparency to how public funding are being utilised,” it said.

The CIF will operate under a commercial mandate toward eventually becoming self-sustaining through its investment returns, with earnings channelled back to finance more ECF and P2P campaigns.

“If successful, the CIF would be self-replenishing and will not be reliant on new funds from the government in the future, thereby helping alleviate some of our fiscal burden.

“It is my wish that this fund will provide a boost for our ECF and P2P industry, as well as putting down a challenge for our operators – demonstrate your effectiveness as platforms to fund Malaysia's innovative SMEs, and the government will channel more of SME funds through these market-based financing platforms, as part of further democratising financing for SMEs.

“The final details of the fund are being worked out by the SC and the CIF should be operationalised by early next year,” it said.