The Labuan International Business and Financial Centre or Labuan IBFC have been a global financial hub for many years now. With the rise in cryptocurrency trading and investments globally and also in Malaysia, the IBFC has since been actively involved in digital financial services.
The growing market for investments
The Labuan Financial Services Authority has recently announced that the region has grown and recently expanded its services to the ‘digital family’. This is an approach that shows progress and improvement and it could pave the way for legacy licenses in Labuan to include a digital variant. It would also need to ensure that the regulatory requirements and entry criteria are met. The COVID-19 pandemic has accelerated this situation and now, businesses can no longer rely on the traditional ways of doing business anymore.
Moving into digital since 2017
Financial services moving into digital platforms is the current trend and Labuan IBFC has not fallen behind. In fact, it embarked into the digital segment back in 2017. Then, there was only 1 license and to date, it has grown into one of the most efficient digital finance eco-system. There are now digital banks, digital asset exchanges, tokenization licenses, e-payment systems and even Robo-advisory systems.
As of June 2020, the Labuan FSA has approved 46 Digital Financial Services Operators. Among them are 3 digital banks, 2 digital securities exchanges and 19 trading platform providers for cryptos. That goes to show how committed they are and how the market is really moving towards. Licenses to operate digital asset exchanges here however are not the same as those by the Malaysian Securities Commission (SC) and would have different implications as they are not the same entities.
The Huobi Situation
One such case is with Huobi.com. The cryptocurrency exchange had announced that they are a ‘localized digital asset exchange for the Malaysian market’. However, this has caused some confusion among the investors. As of February 2021, Huobi has the license to operate within Labuan but has yet to obtain additional approval from the SC. In other words, the platform can operate within Labuan (which technically means it is part of Malaysia) but not outside the Federal Territory. Unlike SC-regulated DAXs like Luno, Tokenize and SINERGY, Huobi is not permitted to carry out the activities onshore in Malaysia. While investors can still use Huobi, it means that they are not protected under the Malaysian regulations.