SC announces 4 new Digital-Related Initiatives to Boost Capital Market and Support Economic Recovery

In a move to further liberalise Malaysia’s capital market and to address the funding needs of Small and Medium Enterprises (“MSMEs”) and Mid-Tier Companies (“MTCs”), the Securities Commission Malaysia (“SC”) had on 31 October 2022 announced four (4) new digital-related initiatives, briefly summarised as follows:

1. Registration of new ECF and P2P market operators with Shariah solutions and value propositions

The SC will open the applications window to register new equity crowdfunding (“ECF”) and peer-to-peer financing (“P2P”) market operators which will further facilitate fundraising by MSMEs via Shariah offerings on a digital platform. This initiative will enhance the Islamic fintech ecosystem and aims to foster the growth of MSMEs in the halal economy while allowing greater access to investments for all capital market participants.

There are currently 10 ECF operators and 11 P2P operators registered with the SC.

2. Registration of new P2P operators focusing on the offering of debt-based financing instruments by MTCs and other larger companies

In addition to the above, the SC plans to register new P2P market operators which will allow MTCs to seek debt-based financing directly from investors on a digital platform, while reducing the number of intermediaries involved in the process. This initiative also aims to bridge the financing gap wherein most MTCs have outgrown existing financing avenues for MSMEs but are still too small for traditional public markets.

3. Registration of new Recognised Market Operators-Digital Asset Exchange (RMO-DAX) to facilitate regulated digital asset investments

The SC recognises that investment in alternative assets is becoming more prevalent and will also open new applications for prospective digital asset exchanges (DAX) with differentiated value propositions. There are currently only four (4) DAX operators registered with the SC. This initiative will increase capital market vibrancy by widening the number and types of DAX platforms available for investors to invest in, that is also safe and secure.

4. Establishment of a RM30 million Digital Innovation Fund to encourage digitalisation of the capital market

The SC will establish a Digital Innovation Fund (DIGID) to co-fund innovative projects that utilise technology to enable new and competitive propositions for the Malaysian capital market. Applications for DIGID funding can be submitted to the SC beginning 1 January 2023. Successful candidates will receive funding on a reimbursement basis after meeting agreed-upon milestone deliverables, and such funding will cover up to 70% of approved qualifying expenses, capped at RM500,000 per project.

MSMEs and MTCs collectively contribute more than half of the country’s Gross Domestic Product (GDP) and are integral to Malaysia’s future growth and economic sustainability. The above initiatives are thus seen as essential to support the post-pandemic recovery journey of MSMEs and MTCs in terms of their financing needs, as well as their continued innovation and growth potential.

It is interesting to note that a majority of the initiatives announced by SC concern the re-opening of the application window for prospective recognised market operators, namely ECF, P2P and DAX. The SC has also divulged in its announcement that the updated guidelines and forms in respect of ECF, P2P and DAX operator applications will be made available on its website from 15 November 2022. Be that as it may, interested parties may engage with the SC on such applications from 1 November 2022.

For more details, please refer to the full media release by the SC here: SC Unveils Digital-related Initiatives to Bolster Capital Market – Media Releases | Securities Commission Malaysia