KUALA LUMPUR: The Securities Commission Malaysia (SC) will introduce a regulatory sandbox framework that provides a controlled environment for testing innovative products and services while ensuring investor protection.

Chairman Datuk Mohammad Faiz Azmi said this initiative aims to encourage securities tokenisation and spur innovation in the capital market.

"The sandbox is a regulatory tool designed to enhance policies to ensure they are fit for purpose. For example, it may allow innovative tokenised offerings to be tested within the sandbox, in line with the SC's efforts to develop a technology-agnostic approach for tokenised securities and identify best practices.

"In this respect, the SC will develop guidance early next year to help intermediaries understand and manage the associated risks related to securities tokenisation," he said during his opening remarks at the SCxSC Fintech Summit 2024, themed 'Where Innovation Meets Purpose'.

This year's SCxSC Fintech Summit focuses on the use cases and opportunities presented by emerging technologies, such as artificial intelligence and blockchain, in the capital market.

Expanding on the regulatory sandbox, Mohammad Faiz noted that the SC is collaborating with Khazanah Nasional Bhd to explore the issuance of tokenised bonds.

By investigating the use of smart contracts and custodial arrangements, the SC aims to develop forward-looking policies that support the future of the capital market.

Corporations will have until April 2025 to apply for the first cohort of the sandbox, he added.

These sessions are available immediately, and interested parties can begin engaging by emailing afinity@seccom.com.my.

Accepted applications will have up to 12 months to test their products or services.