Malaysia's Securities Commission (SC) is considering easing the process for listing crypto assets on Digital Asset Exchanges (DAX) to boost the sector's competitiveness and encourage innovation while strengthening investor protection and operational standards. The SC has published a consultation paper seeking public feedback on proposed enhancements to its regulatory framework for DAX. The consultation period is open until August 11, 2025.

Proposed Changes to the Regulatory Framework

• Liberalizing the Listing Framework: The SC is proposing to remove the requirement for direct approval for listing certain digital assets on DAXs, provided they meet specific minimum criteria. This aims to accelerate the time-to-market for new assets, increase the accountability of DAX operators, and widen product offerings for investors.
• Enhanced Governance and Client Asset Protection: The regulator plans to impose stricter requirements for safeguarding client assets, mandating segregation protocols and enhanced governance frameworks.
• Strengthened Requirements for DAX Operators: The SC intends to raise financial thresholds for DAX operators to ensure operational stability and boost investor confidence.
• Addressing Higher Risk Assets: The SC is seeking input on whether certain types of assets, which it views as higher risk, should be permitted for trading. These include privacy coins, memecoins, stablecoins, tokenized assets, and exchange tokens.

Rationale and Objectives

The proposed reforms reflect the maturing digital asset market in Malaysia and the regulator's attempt to balance innovation with market discipline. Total DAX trading volume in Malaysia reached RM13.9 billion in 2024, more than doubling from the previous year. The SC aims to position Malaysia as a credible hub for digital assets in Southeast Asia by streamlining asset listings and enforcing higher operational standards, while also shielding investors from systemic risks.

The SC's proposals recognize the growing interest from conventional capital market intermediaries and institutional investors in participating in the digital asset space, either through direct investment or via investment funds. DAXs play a crucial role in enabling responsible access to digital asset investment in a regulated environment that promotes a fair, transparent, and orderly marketplace.

Assets Under Consideration

The SC is seeking industry input on whether certain types of assets, which it views as higher risk, should be permitted for trading. These include:

• Privacy Coins: Cryptocurrencies like Monero that offer heightened privacy features. The SC is concerned that the lack of transparency in these assets may appeal to individuals involved in unlawful conduct, increasing the risk of money laundering and terrorism financing.
• Memecoins: Assets "intended to follow internet trends or popular culture". The regulator is concerned about their heightened volatility.
• Stablecoins and Tokenized Assets: The regulator is also seeking input on these assets.
• Exchange Tokens: The SC cited potential conflicts of interest with these assets.
• Nascent Utility Tokens: The regulator is seeking input on assets with low market demand, such as "nascent utility tokens".

Tokenized Capital Market Products

The Securities Commission Malaysia (SC) has unveiled a proposed regulatory framework for tokenized capital market products. The framework distinguishes “tokenized securities” from cryptocurrencies and utility tokens, while adopting a phased approach that initially focuses on “digital twin” tokens rather than natively digital blockchain assets often referred to as “digital securities”.