This update is relevant to FinTech companies, startups, investors, and financial service providers looking to stay ahead in Malaysia’s rapidly evolving financial and regulatory ecosystem.
On 1 October 2024, our corporate legal team attended the SCxSC FinTech Summit, organised by the Securities Commission of Malaysia in Kuala Lumpur. During the event, Dato’ Mohammad Faiz Azmi, Chairman of the Securities Commission Malaysia (“SC”), delivered a keynote address on the future of FinTech in Malaysia.
Key takeaways for businesses and industry leaders
- AI-Driven Investment Personalisation: AI is set to revolutionise the personalisation of investment services, enabling tailored financial advice and decision-making on a large scale. FinTech businesses should begin integrating AI tools that offer bespoke strategies traditionally reserved for institutional investors, thereby levelling the playing field for smaller investors to access more advanced financial planning options.
- Innovative Fundraising Models: AI-powered credit assessments are poised to transform how businesses evaluate borrowers, leveraging vast data sets, including non-traditional sources like behavioural insights, for more accurate risk profiling. Additionally, companies should explore blockchain-based utility tokens as a new fundraising method, allowing investors to access products or services in exchange for tokens. These emerging models could redefine traditional equity and debt financing by offering more flexible, efficient capital-raising alternatives.
- Tokenisation of Assets: Tokenisation — the process of digitising real-world assets and representing them on a blockchain—is projected to experience rapid growth. FinTech companies should investigate opportunities in fractional ownership, faster settlement times, and greater transparency, all enabled by tokenisation. The increasing adoption of tokenised securities will reshape asset trading, opening up new pathways for liquidity and investment.
SC’s Key Initiatives
The SC announced three significant initiatives to drive responsible FinTech innovation:
- Regulatory Sandbox: The SC is adopting a cohort-based approach for its Regulatory Sandbox, accepting applications until April 2025. This initiative provides a safe testing environment for businesses working on innovative products, particularly in areas such as financial inclusion, retirement solutions, sustainability, and Islamic finance. FinTech companies developing cutting-edge solutions should consider applying, especially if they are navigating regulatory challenges.
- Guidance on Tokenisation: To support the growing field of securities tokenisation, the SC is strengthening its regulatory framework, helping businesses manage both the risks and opportunities of tokenising assets.
- Tokenised Bonds: In collaboration with Khazanah Nasional, the SC is exploring tokenised bonds, signalling its future foray into capital debt markets. FinTech firms should prepare for a shift towards smart contract-based bonds and assess the impact on their financial strategies.
The SCxSC FinTech Summit 2024 made it clear that the FinTech industry is at a pivotal moment. Businesses must act now to harness emerging technologies like AI, tokenisation, and blockchain while staying attuned to evolving regulatory landscapes. Those that embrace innovation responsibly will be better positioned to seize new opportunities and contribute to shaping the future of finance in Malaysia.
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This article was written by Sylvia Lock (Senior Associate) from Donovan & Ho’s corporate practice group.
Donovan & Ho is a law firm in Malaysia, and our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. Feel free to contact us if you have any queries.
