On 30 January 2026, the Securities Commission Malaysia issued the Practice Note on Offering of Broking Services for Digital Assets, providing regulatory clarity on how licensed capital market intermediaries may offer broking services involving digital assets.
In practical terms, the Practice Note explains how licensed securities brokers may facilitate digital asset trading within the capital markets framework, subject to specific operational, custody, and client protection requirements.
Issued under section 377 of the Capital Markets and Services Act 2007, the Practice Note sets out the conditions under which conventional securities brokers can extend their services into digital assets while remaining within Malaysia’s established capital markets framework.
Rather than introducing a new category of licence, the Practice Note builds on existing regulatory structures.
It explains how digital assets that meet prescribed criteria are to be treated when offered through licensed broking services.
Crucially, it also outlines the additional safeguards required to protect market integrity and client interests.
Bringing Digital Assets Within the Securities Framework
Applicability under the Practice Note is limited to Capital Market Services Licence (CMSL) holders licensed for dealing in securities, including those restricted to listed securities.
The scope is anchored in the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019, which recognises certain digital currencies and digital tokens as securities when specific conditions are met.
The regulatory approach places digital asset broking firmly within the perimeter of regulated securities activities.
CMSL holders may offer broking services for digital assets that fall within the prescribed definition. It is however, subject to compliance with the additional requirements set out by the SC.
Discretion remains with the regulator to grant exemptions or variations where adjustments do not undermine the intent of the framework.
What Brokers Must Do Before Offering Digital Asset Services
Prior notification to the SC is required before any CMSL holder may begin offering broking services for digital assets.
Notification must be accompanied by a formal declaration. It is then must be submitted in a prescribed format, confirming alignment between the intermediary’s operational policies and procedures and relevant SC guidelines.
Validation of the declaration must be carried out by an independent auditor registered with the Audit Oversight Board.
External validation introduces an additional layer of assurance and reflects regulatory expectations that operational readiness should be independently assessed.
All notifications and supporting documentation are submitted to the SC’s Intermediary Supervision Department before services commence.
How Digital Asset Trading Is Expected to Work
Specific limits govern how CMSL holders may facilitate digital asset transactions.
Digital assets may only be sourced from digital asset exchanges registered with the SC or from foreign digital asset trading platforms and counterparties subject to regulatory oversight in jurisdictions aligned with Financial Action Task Force standards.
Involving foreign platforms requires CMSL holders to undertake comprehensive due diligence.
Verification of regulatory registration or licensing status, along with assessment of anti money laundering, counter terrorism financing, and counter proliferation financing controls, forms part of these expectations.
Brokers may also be required to obtain documentary evidence or confirm regulatory standing directly with foreign authorities.
Trading activities are limited to digital assets that have received concurrence from the SC. Intermediaries are directed to rely on the list of approved digital assets published on the SC’s website.
Transactions must be conducted strictly on a cash upfront basis. Margin financing or lending facilities for digital asset trading on the other hand, are prohibited.
Discretionary authority over clients’ digital asset trading accounts is also not permitted.
Safeguarding Client Assets in a Digital Environment
Client asset protection occupies a central position within the Practice Note. Full segregation of clients’ assets, including both fiat currencies and digital assets, from the firm’s own assets is required.
Assets must be clearly identified and held separately to prevent commingling or misuse.
Custody of clients’ digital assets must be undertaken by a digital asset custodian registered with the SC. But do note, it only happens unless a prior written approval is obtained to appoint a foreign custodian.
Income, yield, or other benefits derived from clients’ digital assets are also required to accrue to the client unless explicit written consent provides otherwise.
Proper records must be maintained to evidence consent and the distribution of returns.
What Clients Must Be Told
Meaningful disclosure to clients forms a key requirement under the Practice Note.
CMSL holders are expected to communicate material information relating to digital assets in a clear and easily understood manner, including disclosures on key administrative controls and business continuity arrangements.
Explanations are also required on the handling of distributed ledger technology-related events. This includes things such as hard forks and airdrops, as well as on the treatment of clients’ rights in such scenarios.
Details of custodial arrangements for clients’ digital assets must likewise be disclosed. It is so that clients understand how and where their assets are held.
Expectations Around Risk and Capability
Sufficient manpower, expertise, and operational capability are expected of CMSL holders offering digital asset broking services. Understanding risks associated with ownership structures, technology, and operational processes forms part of these expectations.
Responsibility for identifying and managing such risks rests with the intermediary.
Governance and risk management frameworks supporting digital asset activities are therefore expected to align with standards applied across other regulated capital market activities.
A Framework Focused on Orderly Participation
Taken together, the Practice Note provides a structured and cautious framework for offering digital asset broking services in Malaysia.
Embedding digital assets within existing securities regulation and reinforcing client protection principles allows licensed intermediaries to participate in this segment of the market.
It also helps in maintaining orderly conduct and regulatory oversight.
Featured image: Edited by Fintech News Malaysia based on an image by hamzaazeem1387 and SuYuk via Freepik.
