SCxSC: Digital finance innovations in Malaysia’s capital market

The 4th edition of the Securities Commission’s (SC’s) Digital Finance Conference (SCxSC), has garnered 1500 participants this year. Themed “Democratising Investments”, the event serves as a platform for the regulator and industries in Malaysia, to discuss and explore capital market solutions that leverage digital services.

Themed “Democratising Investments” this year, the SC also reported the progress they have made in digital markets since revealing its Digital Markets Strategy, last year. In summary, the strategy aims to enhance access for financing, to increase investor participation, augment the institutional market, and develop ecosystems that are synergistic.

To that end, a number of initiatives have been put into motion, and are about to be put in motion.

The Securities Commission’s flagship digital finance event, SCxSC, was officially launched by the Second Finance Minister of Malaysia, Johari Abdul Ghani

In 2015, 2016, and 2017 respectively, SC had introduced regulatory frameworks to facilitate equity crowdfunding (ECF), peer-to-peer (P2P) financing, and digital investment management (DIM).

Also in the pipeline, is an industry blueprint for Distributed Ledger Technology (DLT), and a framework for cryptocurrency trading.

Digital platforms for finance

SC Chairman, Ranjit Ajit Singh shared that RM50 million had been raised via ECF and P2P platforms, successfully creating inclusive and broad-based participation as well, from women and the under-35 segments. Seventy-percent of issuers for ECF, have been women and/or from the youth segment, for example.

With regards to DIM, which had its regulatory framework launched last May, Ranjit said, “The idea is to allow digital investment services to be offered. We have been engaged by parties, and there is interest from existing investment managers and new startups.”

According to him, the aim is to create services that are cheaper and more efficient for members of the public, and that there is progress since the framework was introduced in May.

“We anticipate by first half of 2018, to have the first licensee (for DIM), so progress is as it should be.”

Distributed Ledger and Cryptocurrencies

SC is also exploring DLT with a view to create more transparency and greater participation with the Over-The-Counter (OTC) and P2P, ECF, or unlisted segments.

Doing this via their Alliance for Fintech community, or aFINity programme, of over 100 participants, SC is exploring potential DLT use cases in the capital market for operational efficiency and certainty.

“We want to understand the technology better, ourselves, and see how to partner (with the ecosystem) and apply it within the unlisted segment, as well as create secondary market requirements, enhance efficiency of the financing segment, and also in the OTC markets to make it more transparent,” Ranjit explained.

He observed that DLT is available globally, in pockets and in different segments. “SC has always been looking to see how we can increase digital innovation. So, we feel it is an area that can offer benefits from the operational efficiencies point of view.

“So, we are embarking on this pilot project ourselves,” he said. The blueprint that would result, aims to help with the application of DLT, in the capital market.

Ranjit also shared that the SC is working on a framework for cryptocurrencies trading, that should be available in the next few months. However, he also added that they want to take advantage of discussions that are currently taking place on the global regulation front.

“There are different positions by different regulators around the world (with regards to cryptocurrencies). We want to be able to make sure, we have considered developments, which have occurred quite recently,” he concluded.