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On January 29th, 2020, Serunai Commerce announced an expansion to develop a digital halal ecosystem. In order to fund the expansion, Serunai executives say they are “likely” to leverage a security token offering, with the help of Blockchain Labs Asia.
Serunai Commerce Leveraging an STO to Finance Digital Halal Ecosystem
Serunai Commerce is a Malaysian firm founded in 2009. The company has developed several halal technology services, such as a catalog containing data concerning halal retailers, suppliers, manufacturers, and buyers across the globe. Serunai has also developed the Verify Halal mobile application which enables consumers to verify the origin of items in grocery stores.
Recently, Serunai was tasked by the Islamic Development Bank (IsDB) to build a digital halal ecosystem. In order to fund the expansion, the company says it will likely launch a Security Token Offering (STO).
The project will first start in Indonesia, in collaboration with BPJPH, Indonesia’s halal products certification agency. According to Amnah Shaari, Serunai’s CEO,
“This includes working with them to design a masterplan for the country, and giving them our platform and also our halal suites of technologies to make sure that authorities are guided, their players are using the correct system and all halal products and restaurants are trackable.”
When it comes to raising funds — which the company says will go toward this project along with others — Serunai has been investigating the alternative securities markets for quite some time. Within the next six to eight months, the company is likely to launch an STO. Amnah says,
“We are an advanced technology company, so any new technology, naturally we are looking at it very seriously. That’s why I’m looking seriously at how to raise [funds] properly through a security token.”
Amnah says the primary company she has consulted with regarding an STO is Blockchain Labs Asia (BLA). Situated in Kuala Lumpur, Malaysia, BLA is a FinTech firm with a focus on regulatory compliant STOs. When discussing the benefits of security tokens, Weir said,
“It’s because of the ability of a security token to have logic: it’s a programmable security so you can build in the rules for your sukuk, for example, to be an Islamic-orientated security in the token itself.”
Laws and Regulations for Security Tokens in Malaysia Explained
Just a few weeks ago on January 15th, 2020, Securities Commission Malaysia (SC) published new guidelines covering the use of digital assets in fundraising. The SC says any company that wants to issue digital assets must do so through an SC-registered Initial Exchange Offering (IEO) platform.
IEOs are conducted through cryptocurrency exchanges as opposed to a single company launching its own offering, as seen with the Initial Coin Offering (ICO). In the United States (US), the SEC has issued a formal warning against IEOs. While STOs differ drastically from ICOs, many in the US claim IEOs are just another form of the ICO.
In Malaysia, IEOs are seen in a different light, but still must satisfy a number of requirements. For example, the operators of exchanges must carry out “due diligence” of the offerings they decide to list. Several factors have to be analyzed, including the viability of the asset, along with additional characteristics. Typically, such analysis is difficult for retail investors, providing an extra level of investor protection in the eyes of the SC.
Further, IEOs must be incorporated in Malaysia and have a minimum of USD $1.23 million (5 million ringgit) in paid-up capital. A trust account must also be kept for capital received from investors with a licensed financial institution in Malaysia. If the IEO itself plans to trade the assets it issues, it must register as a Digital Asset Exchange operator — an additional requirement implemented by Malaysian authorities.
The new guidelines were issued earlier this month, but won’t take effect until the second half of 2020. In this way, actors in the digital asset space will have sufficient time to become familiar with the new requirements.
What do you think about Serunai Commerce exploring the idea of a security token offering in Malaysia? Will Malaysia’s new guidelines boost the security token industry? We’d like to know what you think in the comments section below.
Image courtesy of FinTech Singapore.