Digital coin offerings should only be for sophisticated investors for a start

KUALA LUMPUR: The initial coin offerings (ICOs) should be only offered to sophisticated investors in the initial stage, according to project director for the Malaysian Blockchain Regulatory Report Nur Husna Zakaria.
Speaking at a panel session after the launch of the Malaysian Blockchain Regulatory Report today, she said strong regulatory framework has to be imposed as not every investor is well aware of ICOs despite the move limiting the pool of investors.
“At this moment, Malaysia is not ready yet, it’s good to have control rather than the market regulates on its own.”
Husna said one of the recommendations for ICOs is the clarity and certainty on the legal status of ICO tokens that will be regulated under the securities regulations.
“The first is by providing clear guidance as to how ICO tokens may fall within the ambit of various capital market products. The second and more advanced approach is by prescribing ICO tokens which have the investment feature as a regulated investment instrument.”
In addition, she said there are three main assessment for pre-offering approval – the value of the project underlying the ICO, capacity of the issuer and the effects of the ICO and project to ensure full disclosure of any risks attached to the project.
“A disclosure regime should be the main focus and the first immediate measure in regulating ICOs. This will not only prevent market failure due to information asymmetries but it will also build confidence in the ICO market through improving the quality of offerings.”
According to the report, there are three types of digital tokens – currency, utility and security.
Currency tokens are created and registered on blockchain such as bitcoin and ether. With utility tokens, one can access a product or service that the development team has created on the issuer’s platform.
Meanwhile, security tokens promises returns to investors and it can be analysed from the white paper relating to the ICOs.
Many digital tokens, however, exhibit more than one component. For instance, ether, the native digital token of Ethereum platform, is a hybrid form of currency and utility components. – By Lee Weng Khuen