FAQ on Labuan Innovative Digital Financial Services
The FAQ on Labuan Digital Financial Services will answer your concerns about the type of digital activities that are permissible under the Labuan jurisdiction.
Types of Digital Financial Services in Labuan
In summary, the innovative digital financial services that are now offered in and through Labuan include:
Labuan Cryptocurrency or digital currency exchanges and platforms
Labuan Digital Banks and Labuan Digital Investment Banks
Labuan Robo-Advisory Services
Labuan FinTech Funds
Labuan Digital Token Issuance, Initial Coin Offering (ICO) via Credit Token License
Labuan Security Token (STO) for Fund Raising
To read the comprehensive information on Labuan Digital Financial Services, click here.
To read more about Labuan FinTech and Blockchain, visit here.
Here are some frequently asked questions on Labuan Digital Financial Services for your further understanding:
Financial technology (FinTech) refers to technology-enabled innovation in financial services [hereby referred to as Innovative Financial Services (IFS)]. In many parts of the global financial markets, IFS has been observed to spur new business models, processes, mobile application etc. IFS is seen to have a transformative effect on financial markets and institutions on the provision of financial services as a whole.
Yes, FinTech or IFS is seen as the contemporary innovative thinking that can be leveraged on to modernise the Labuan businesses in the market. In this regard, Labuan FSA’s strives for the regulations and rules of Labuan IBFC to remain business conducive, more future-oriented and aligned with rapid techno-advancements especially on IFS that is driving structural and process changes in the financial sector.
Only IFS activities that fall within the ambit of the Labuan Financial Services & Securities Act 2010 (LFSSA) or the Labuan Islamic Financial Services & Securities Act 2010 (LIFSSA) are regulated by Labuan FSA.
- Labuan Cryptocurrency or digital currency exchanges and platforms
IFS activities which are not subsumed by LFSSA and LIFSSA may include:
- Provision of consultancy & management services such as project management, administrative, real estate, etc.
- Advisory experts as project specialist, trainer coaching or even industry specific coaching.
- International trading business whether as a general trader, importer/exporter, industrial and customised equipments, non-petroleum commodities or deal maker.
- Internet marketing which include e-commerce, web design and Search Engine Optimisation (SEO) specialist.
- Provision of backroom processing.
The above list of activities are not exhaustive but it provides indication of the types of activities that are not under LFSSA and LIFSSA. Labuan entities undertaking them must ensure compliance to the Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) Requirements issued by Bank Negara Malaysia (BNM) and Labuan FSA, and market conduct requirements to promote good market conduct practices via product transparency and disclosure as well as high standard of professionalism in their dealings with clients.
Labuan entities undertaking IFS are expected to have the necessary cyber resilience. This include strengthening their cyber security such as installation of firewalls, regular security scans or the selection and maintenance of password. The extent of such measures would be dependent on the vulnerability of their system setup and the risks posed by the IFS activities.
Labuan entities which intend to undertake IFS activities, particularly on the exchange of digital currencies either from or to fiat money, or from or to another digital currency, would need to comply with the AML/CFT requirements under the Guidelines on the Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) – Digital Currencies (Sector 6) issued by BNM. The said Labuan entities are subjected to obligations as a reporting institution under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.
Labuan IBFC opt for a more market liberal approach for proposed IFS businesses. Labuan entities are allowed to undertake these businesses subject to them complying with the AML/CFT regulations and market conduct requirements, especially for those whose businesses are governed by LFSSA and LIFFSA.
Unlike other markets which choose to insulate or contain the IFS business in different regulatory platforms (e.g. sandboxes or incubators) for observation and experimental purposes, Labuan IBFC believes that IFS start-ups need to operate in the actual, open international market. This is to inject business pragmatism in IFS undertakings so that they can better adapt and gain traction in the market.
Only notification to Labuan FSA by the Labuan licensed entity is required should the entity plans to implement a blockchain-based technology such as e-KYC to improve its operations.
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