Malaysia's Securities Commission Proposes New Rules for Cryptocurrency Exchanges

According to Cointelegraph, the Securities Commission Malaysia (SC) has announced a proposal seeking public feedback on a framework that could allow cryptocurrency exchanges to list certain digital assets without requiring explicit approval from the regulator. The proposed rules aim to liberalize the listing process for digital assets, enabling exchanges to list assets that meet specific criteria without prior approval. This initiative is designed to accelerate the time-to-market for digital assets, enhance accountability among crypto exchange operators, and expand the range of product offerings available to investors. Under the proposed framework, exchanges would be held accountable for their decisions to list specific assets. To qualify for listing, digital assets must have undergone security audits with publicly accessible results and must have been traded for at least one year on a platform compliant with the Financial Action Task Force. The SC is also seeking industry input on whether certain high-risk assets, such as privacy coins like Monero (XMR), should be permitted for trading. These assets are noted for their enhanced privacy features, which may appeal to individuals involved in unlawful activities, potentially increasing the risk of money laundering and terrorism financing. The consultation paper also addresses other asset types, including memecoins, which are known for their volatility due to their alignment with internet trends and popular culture. Additionally, stablecoins and tokenized assets are mentioned alongside exchange tokens, which may present conflicts of interest. The SC is requesting feedback on assets with low market demand, such as nascent utility tokens, due to their higher risk profile. Furthermore, the SC has proposed revisions to governance and custody rules, aiming to tighten requirements for client asset security and governance. Digital exchange operators would be subject to stricter rules, including the segregation of user assets and new minimum financial criteria. These criteria would include policies and procedures to mitigate the risk of loss or misuse of user funds and facilitate repayment in the event of insolvency. Exchanges would also be required to appoint a senior management member residing in Malaysia to oversee the administration of digital wallets. This measure is intended to mitigate the risk of loss or misuse of customer assets and facilitate the movement of digital assets. Additionally, exchanges that custody user assets would need to register as digital asset custodians or engage a custodian registered with the SC to provide these services.