Malaysia Digital Asset Exchange License

Malaysia Digital Asset Exchange License 

• The Malaysia Digital Asset Exchange License is one of the major regulatory policies supervised by the Securities Commission Malaysia (SC) since 2019. It ensures that all operations concerning cryptocurrency take place in a systematic and compliant environment, making sure that Digital Asset Exchanges comply with financial laws and regulations. At Tetra Consultants, through extensive experience in international business setup across over 50 jurisdictions, we lead clients through the labyrinthine process of obtaining the Digital Asset Exchange License.  

• We further offer a variety of services, from corporate bank account opening to accounting/tax solutions. Additionally, we also are well knowledgeable about applications for other licenses, including the Singapore payment institution license, Estonia cryptocurrency license, Lithuania EMI license, and Canada MSB license. We are ready to assist your Malaysia compliance and operation with competence. 

Advantages of Malaysia Digital Asset Exchange License 

Supportive and business-friendly regulatory framework 

• Malaysia, in fact, has turned out to be very supportive of the landscape in digital assets, hence providing a clear and encouraging framework concerning the innovations in Fintech. The Securities Commission Malaysia actively promotes the use of blockchain technology. There is therefore creation of a facilitative environment apt for growth and development concerning Digital Asset Exchanges. This proactive stance helps foster innovation while ensuring that businesses work within a well-defined regulatory structure. 

Streamlined compliance requirements 

• Compared to many other jurisdictions, Malaysia’s compliance obligations for Digital Asset Exchanges stand out as quite less burdensome. Such a simplified approach would make operational processes easier; thus, one could be more business-like, focusing on growth and innovation rather than over-compliance, not failing to address core regulatory requirements. 

Tax advantages 

• The major tax benefit of Malaysia is that no capital gains tax is imposed on the sale of digital assets. Therefore, this increases profitability a lot for operators and clients, hence making it an attractive jurisdiction to deal with cryptocurrencies. 

Expansive market potential 

• The Malaysian market has shown increasing interest in cryptocurrencies, where, according to local reports, digital assets are among the investment classes of choice. This emerging interest does provide a substantial opportunity for businesses to start engaging with an up-and-coming, dynamic customer base. Licensed and approved exchanges within Malaysia can assure access to a wide range of approved digital assets. This diversity caters to varied investor preferences and strategies, further enhancing liquidity and trading volumes in the market, and thus appealing to more people. 

Enhanced credibility and trust 

• A license from the SC gives more credibility to a Digital Asset Exchange. With regulation by the SC, customers are assured that an exchange meets high standards regarding matters such as AML/CFT requirements. 

• This licensing process means proper measures have been taken to keep the assets and data of the customers safe. All of this would inevitably inbreed trust among the users, meaning more users participating and trusting the exchange. 

Opportunities for innovative fundraising 

• Accountability through licensing comes from the efficiency in Initial Exchange Offerings that permit startups and entrepreneurs to raise capital in digital form. This potential of the exchanges, by providing alternative mechanisms of fundraising, could spur economic growth and drive innovation in the local market. 

Regulatory authority managing Malaysia Digital Asset Exchange License 

• Securities Commission Malaysia (SC) is the regulatory authority responsible for the management and administration of the Digital Asset Exchange license in Malaysia. The SC, within the guidelines and framework provided by the Guidelines on Recognized Markets, works to offer a systematic and complaint environment where Digital Asset Exchanges can be carried out. 

Key responsibilities of Securities Commission Malaysia includes: 

Licensing and approval 

• The SC is responsible for licensing and regulating the dealings in Digital Asset Exchange, including the authorization and licensing of Digital Asset Exchanges. An applicant to be qualified as an exchange should be a locally incorporated entity with at least a minimum paid-up capital of RM5 million. It provides a licensing mechanism through proper due diligence that the applicants will have the required financial stability, technical infrastructure, and capability to operate properly. 

Regulatory oversight 

• The SC undertakes the arduous process of overseeing licensed exchanges to ensure orderly, fair, and transparent operations. Besides, it enforces prescriptions that are intended toward protection for investors and upholding market integrity. To this end, the SC plays an indispensable role in developing a secure trading environment in which confidence can be nurtured among participants. 

Compliance monitoring 

• SC performs one of the main functions by properly monitoring critical regulations on anti-money laundering and combating financing of terrorism. Besides this, it makes sure that exchanges would operate within all operating instructions provided within the Digital Asset Exchange framework. This regular supervision prevents any incorrect activities and offers full guarantees of the functioning of the exchange within the limits of the law and regulations. 

Market development and promotion 

• The SC does this through active promotion of the development of the digital asset market in Malaysia through innovations and growth, while putting appropriate investor protection and financial system stability measures in place. All the efforts by SC are, therefore, focused on fostering a dynamic and secure digital asset marketplace for overall advancement in Malaysia’s fintech ecosystem. 

Types of Malaysia Digital Asset Exchange License 

The types of licenses available for businesses operating in the digital asset space include: 

Recognized Market Operator for Digital Asset Exchanges (RMO-DAX) 

• The RMO-DAX license is the one that enables an electronic platform to professionally support digital assets trading. Operators with such licenses may opt for either an order book model, in which a trading platform matches buyers and sellers, or a digital broker model, whereby the operator acts as an intermediary between buyers and sellers. 

Digital Asset Custodian (DAC) 

• A digital asset custodian is entrusted with the safekeeping of digital assets. The core role is to protect digital assets on behalf of investors from misfortune. In this regard, the DAC plays a critical role in the management and custody of entrusted assets by providing a secure environment against theft, loss, or mismanagement. 

Initial Exchange Offering (IEO) Operators 

• IEO operators provide a platform for Initial Exchange Offerings, which represents another alternative fundraising mechanism whereby business entities may raise capital by the issuance of digital tokens. Thus, this model gives a structured approach in which startups and entrepreneurs access funding while leveraging the reach that might be given through an exchange platform to potential investors. 

Activities permitted under Malaysia Digital Asset Exchange License 

Digital asset trading 

• The Securities Commission Malaysia permits the buying and selling and trading of approved digital assets by licensed Digital Asset Exchanges. This includes a range of cryptocurrencies, such as major ones like Bitcoin and Ethereum, among others that may have been approved by the SC. In this regard, such a platform will enable users to execute trades in a portfolio and to conduct digital asset transactions in a regular environment. 

Order book and broker 

• The marketplace created by the exchange lets buyers and sellers’ input and match orders against each other directly on price and quantity. This allows for transparency and a complete view of the orders available. 

• The exchange plays the role of intermediary, which executes trades on behalf of their users, along with other services that enable trade execution strategies and market analysis. 

Custodial services 

• A licensed Digital Asset Exchange may provide custodial services for the safe management and storage of digital assets on behalf of its customers. Such custodial services are one sure way to ensure that the assets held by customers are kept safe from theft, loss, or any unauthorized access. All digital assets in their custody must be properly safeguarded with strict security measures, including encryption and secure storage solutions. 

Initial Exchange Offerings (IEOs) 

• The licensed exchanges are empowered to undertake Initial Exchange Offerings, which are a fundraising mechanism that allows businesses to issue digital tokens to investors through the exchange platform. IEOs provide a structured and secure channel through which companies can raise funds in a manner that also leverages the exchange infrastructure in reaching out to a large audience of prospective investors.  

Time required to obtain Malaysia Digital Asset Exchange License 

• For the Digital Asset Exchange License in Malaysia, Tetra Consultants will first set up your Malaysian company within 1 week of receipt of all necessary due diligence documents. After incorporating the company, we will prepare all necessary documents for an application for its license, including a detailed business plan and AML/CFT policy. 

• At the same time, we will hire a local director and a local employee and obtain local office space. 

• Having done all this, a professional license application can be prepared and sent to Securities Commission Malaysia (SC) for approval. The review and eventual approval of the license generally takes 5 to 6 months. Once the license is issued, Tetra Consultants can finally assist in corporate bank account opening, a process that typically takes 4 weeks. 

• Overall, it takes around 6-7 months for securing Malaysia Digital Asset Exchange License. 

Process of obtaining Malaysia Digital Asset Exchange License 

Step 1: Company registration 

• First and foremost, Tetra Consultants will proceed to register company in Malaysia with Suruhanjaya Syarikat Malaysia (SSM) on your behalf. This will include doing all the relevant paperwork as well as completion of all the formalities that ought to exist for your business entity to exist legally. 

Step 2: Fulfill company pre-requirements 

• Further, we will address the specific requisites for company incorporation which is based on the legal structure of your company. This involves: 

• 1 local director  

• 2 shareholders of any nationality  

• Local registered address 

• To comply with these requirements, we provide various services such as resident director in Malaysia. 

Step 3: Meet minimum capital requirements 

• Further, our experts will ensure that a minimum paid-up capital of MYR 5,000,000  (approximately US$ 1,050,000) is established and in place. 

Step 4: Fit and proper assessment 

• After the capital is secured, Tetra Consultants will conduct a proper fit and proper check on all people involved in managing the exchange. These would involve key people such as the chief executive officer, the chief financial officer, or chief operating officer.  

• We will ensure that these people meet the tough criterion for suitability and integrity that will be set by the SC. We also name one responsible person for each management position who has fulfilled all the criteria by the SC. 

Step 5: Establish internal controls 

• Further, our team at Tetra Consultants will implement effective internal audit procedures and wide-ranging risk management frameworks to precisely suit your exchange’s needs. We will be creating detailed Anti-Money Laundering/CFT policies in full compliance with the guidelines set by the FATF.  

• Besides that, we offer legal drafting services in respect of all documents necessary to ensure the policies and procedures of your company are adequate for regulatory expectations, if any, and assist in good compliance. 

Step 6: Transaction monitoring systems 

• We then introduce expert transaction and market surveillance, coupled with advanced analytical systems that assist in ensuring regulatory compliance and further safeguard customer assets. This is realized through the creation of robust surveillance mechanisms to help identify and deter suspicious and irregular activities, tightening up on the security and integrity of your exchange. 

Step 7: Application submission 

• We will prepare and forward the application for the Digital Asset Exchange license to the SC, together with all the supporting documents to prove due compliance on your part in regulatory requirements. The application will detail your business model, operational plans, and risk management strategies to ensure thorough and accurate representation of your exchange. 

Step 8: License approval 

• Our experts would closely follow up on the review process with the SC after the application is submitted. This might involve some queries or supplementary information requested by the SC. After being carefully reviewed, provided it meets all the required regulatory parameters, the SC would grant a license called the Digital Asset Exchange license, thereby legally authorizing your company to operate in the digital asset market. 

Step 9: Post-licensing compliance 

• Where applicable, our experts will ensure that, once licensed, your exchange continues to meet all the requirements for continuing regulation, including regular reporting with the SC and full AML/CFT compliance. We also verify that the exchange trades only approved cryptocurrencies by the SC, while ensuring full regulatory compliance and integrity of the operation. 

Step 10: Corporate bank account opening 

• Once we have fulfilled all the conditions required for compliance after licensing, we will proceed with a corporate bank account opening for your company. This will take approximately 4 weeks and thus will enable your business to open a functional bank account for the management of financial transactions and operational needs. 

Documents required for obtaining Malaysia Digital Asset Exchange License 

• Company registration documents including Certificate of incorporation and Company constitution or articles of association. 

• Notarized copy of identification document for directors and shareholders. 

• Personal particulars and background information of all key personnel such as CEO, CFO, COO. 

• A detailed business plan outlining the exchange’s operational model, target market, and financial projections. 

• Internal audit procedures and risk management frameworks. 

• Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) policies compliant with the Financial Action Task Force (FATF) guidelines. 

• Description of systems implemented for monitoring transactions and market activities on the platform. 

• A plan detailing how the exchange will maintain liquidity to ensure the solvency of customer assets. 

• A list of digital assets the exchange intends to offer, along with evidence of approval from the SC for these assets. 

• Any other documents or information requested by the SC during the application review process. 

Requirements for obtaining Malaysia Digital Asset Exchange License 

• Paid-up capital of at least RM5,000,000 or its equivalent in any foreign currency throughout its operations. It is to be noted that Securities Commission of Malaysia has the right to increase the required paid-up capital depending on the business’ nature, scale, complexity and diversity of their business activities. 

• Malaysia operational office (furnished) where business activities are carried out. Registered or virtual office is not allowed. 

• 1 compliance officer of any nationality 

• 1 local director 

• 1 local employee on the payroll 

Cost of obtaining Malaysia Digital Asset Exchange License 

• The cost of Digital Asset Exchange License in Malaysia at Tetra Consultants is tailor-made to your needs, as well as the scope of work involved. Put simply, the all-inclusive engagement fee covers everything from initial company registration all the way to license application submission. Other additional costs that may involve the process are already included in this all-inclusive fee. 

• Before we proceed with the registration process, we want a detailed consultation where we will outline the total engagement fee. In this way, all costs are defined and understood, which then will be documented in our letter of appointment. 

• Clear and detailed licensing is our way of making the process as smooth and simple for you as possible. We include a detailed cost breakdown, so your licensing journey is as quick and painless, with clarity and ease throughout. 

Looking to obtain Malaysia Digital Asset Exchange License 

• At Tetra Consultants, you are assured of expert consultation on the issuance of a Malaysia Digital Asset Exchange License. Our scope of service focuses on making your exchange operate at the highest standard of regulatory compliance and best practices in the industry. We commit to the growth and success of your business through tailored solutions supported by robust regulatory insights. Partnership with us gives the assurance that one is accordingly working within set regulatory requirements in Malaysia and industry expectations of digital assets, no matter how complex. 

• Contact us to know more about Malaysia Digital Asset Exchange license and our team will revert back in 24 hours. 

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