KUALA LUMPUR, Sept 7—The Securities Commission of Malaysia (SC) has issued a warning on potential risk of ICO as the fundraising tool is widely spread in Malaysia and elsewhere.

“ICO scheme operators typically raise funds through the issuance and sale of digital tokens, in exchange for investors paying for these tokens through virtual currencies, such as Bitcoin or Ethereum,”

it said.

As reported previously, the Central Bank of Malaysia has released a list of 64 “illegal forex or token-based” schemes, which are based in Malaysia. It’s suspected that these schemes are rigged by overseas Chinese. A common practice is to lure new investors from China after the framework is set up.

JJPTR, one of the most popular scheme in Malaysia, announced insolvency due to a hacking incident in June 2017, causing heavy loss to member victims.

The SC said investors should be careful as the scheme operators may not have a physical practice in Malaysia, and it would be difficult to verify the authenticity of the scheme.

The authority also warns the risk in secondary market:

“While digital tokens traded on a secondary market may give rise to risks of insufficient liquidity or volatile and opaque pricing.”

As the terms and features of ICO may differ in each case, the SC advised investors to verify the legal status of the project and seek professional advice.

“Investors may be exposed to frauds, money laundry and terrorist financing activities.”

Investors should read carefully on the project material as

“It may contain disclaimer that exempts the operator certain liability and obligations.”

USA, Singapore and Hongkong have released similar warning before. PBoC goes further by banning ICO on 4 September in China.
Back in 2014, “QR Code Payment” was also suspended by PBoC due to “potential security flaws”. Then in 2016, payment by QR code was granted a legal position by the central bank. Now all commercial banks in China are developing Apps that has the QR payment feature to win a share in micro-payment market.