Under the Guidelines on Digital Assets (“DA Guidelines”), the obligations of an initial exchange offering (“IEO”) operator in relation to the investors’ digital tokens are to:
- ensure that the token holders’ digital tokens are properly segregated and safeguarded from conversion or inappropriate use by any person;
- establish and maintain a sufficiently and verifiably secured storage medium designated to store digital assets from investors; and
- establish system and controls for maintaining accurate and up-to-date records of client’s digital assets held.
To carry out such obligations, an IEO operator may appoint a DAC registered with the Securities Commission Malaysia (“SC”) to provide custody for the token holders’ digital tokens, or it can choose to provide its own custody services, provided it complies with the requirements set out under Part D of the DA Guidelines. In essence, an IEO operator who wishes to provide custody for the token holders’ digital tokens has to, in addition to being registered as an IEO operator, has to be registered with the SC as a DAC as well.
The DA Guidelines define a DAC as a person who provides services such as safekeeping, storing, holding or maintaining custody of digital assets for the account of another person, and such services constitute capital market services for the purposes of Section 76A of the CMSA. Hence, a prospective DAC must satisfy all the requirements set out in Part D of the DA Guidelines and be registered by the SC.
