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Risky ICO industry may not find footing in Malaysia

Concerns over ICOs rise a notch after a Singapore-based foundation announces its plan to an ICO

by AFIQ AZIZ / pic by TMR Graphic

Clear regulations and guidelines are required to safeguard the initial coin offerings (ICOs) in Malaysia after authorities warned the public to exercise extra caution before investing in such digital coin fundraising exercises.

Concerns over ICOs rose a notch after a Singapore-based foundation announced its plan to an ICO called “CopyCoinCash” (CCC) in Malaysia on Wednesday.

The Securities Commission Malaysia (SC), which regulates the country’s equity and capital market, issued a stern reminder for investors to be mindful of the potential risks related to ICOs and investment arrangements involving digital tokens.

“The SC will be calling in key officers of the foundation to inquire into its activities including the purported launch of CCC,” the regulator said in a statement.

The SC is also aware that the ICO operator has organised talks and seminars in major cities in Malaysia, including Penang and Kuala Lumpur, and is closely monitoring such activities and take appropriate actions.

CCC is not the first such ICO to be introduced in the country. Ecobit and HelloGold are among the ICOs which had grabbed interest among the investing communities.

Malaysian Investors’ Association VP Aaron Ting said the first of a well-known Malaysian ICO is Ecobit that was built on the New Economy Movement platform (a type of blockchain platform).

He said Ecobit, a carbon credit project based on Climate Protector Contract, claimed to have links with the United Nations. However, the world organisation had denied any involvement with Ecobit.

Ting said Ecobit had also been red-flagged by the monetary authority and put on the financial consumer alert.

“That has caused only a handful of ICOs to be conducted in Malaysia,” Ting told The Malaysian Reserve.

The Ecobit website listed Aquaponic and Spirulina farmings as some of its key projects. Based on the data from coinmarketcap.com, Ecobit has a market capitalisation of US$23.8 million (RM95.2 million). It was trading at US$0.053 last Friday.

Ting said the ICO industry is currently dependent largely on self-regulation and many ICOs have demonstrated a lack of responsibility towards investors.

He said limited ICO successes, however, had contributed to the rise of illegal pyramid investment schemes.

“Perhaps this industry will grow when the government releases official regulations and provide sufficient investor protection,” Ting said.

Global standards related to ICOs are being adopted and it would ensure the quality ICOs in the future.

HelloGold, which was launched last August, is a Shariah-compliant digital application that allows investors to buy, sell and and hold gold online.

According to its website, HelloGold is developing an app using blockchain for the mass market. HelloGold has a market capitalisation of US$15.5 million and is trading at US$0.06, according to coinmarketcap.com.

Malaysian-based cryptocurrency research platform CoinGecko co-founder Bobby Ong said: “There are some ICOs that have delivered tremendous returns. But, there are many more ICOs where the teams had just simply disappeared with the money raised, or the value of their tokens fell by 90% or more in value.

The SC’s warning may put off any future launches, but National ICT Association of Malaysia research committee chairman Woon Tai Hai said the Singapore’s authority appeared to be more open to ICO activities.

“Instead of regulating the ICO, they focus on the activities around them such as money laundering (and other illegal activities).

“It is (however) still too early to conclude if they are really successful or not, except that they have managed to raise funds and seems to be linked to business models,” Woon said, adding that Hong Kong is emerging as the largest ICO market after the US, Canada and Switzerland.

He questioned whether the business models of these ICOs are sustainable in the long term as some of the businesses remain to be dependent on speculations.


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