Distinguished Guests

Ladies and Gentlemen,

1. Good morning to all, and thank you for making the time to attend the Labuan IBFC”s inaugural digital conference “Connecting Digital Ecosystems Asia” or “CoDE Asia 2019”.

2. I would like to especially thank the speakers and panellists who are with us today to share their insights, experience and knowledge on the challenges as well as opportunities brought forth by digital innovations in the financial space. When organising this conference, it was clear that the content of this conference would need to have an international “flavour” considering the regional role that Labuan IBFC plays as wholesale intermediation centre including the digital market space. Hence, we have speakers hailing not just from Malaysia, but also from international level. More importantly, the audience comprises participants from all over the world. This will indeed bode very well to the furtherance of the digital market in Labuan IBFC.

Ladies and Gentlemen,

3. Labuan IBFC’s digital journey really began in 2017. We started our innovative financial services with only eight licences up to 2018, and since then we are seeing positive take-ups on new digital financial businesses in Labuan IBFC. For 2019 alone, more than 30 licenses have been approved to operate in Labuan IBFC’s digital space. These businesses range from financial services such as digital banking and insurtech to digital intermediaries such as robo-advisory, digital exchanges, crypto trading platforms, blockchain tokens as well as e-payment systems.

4. This “digital family” is continually growing in recognition of the progressive approach that the centre has taken in embracing the digital revolution, by being as facilitative as possible to enable innovative digital business to take root in Labuan. To this extent, the centre has used legacy licences like money broker, credit token licenses to provide the regulatory umbrella for the digital business to be carried out. One can say that is innovation by itself. Thus, the centre has always been having a ready “toolbox” of solutions to meet the needs of the rapidly changing business world in particular the digital industry.

5. The critical key to this solution is that any prospective business model must be legitimate, and has met the necessary criteria for such business to be operated out of Labuan IBFC. Hence, whilst digital financial services are well-supported and encouraged in Labuan IBFC, it is imperative that Labuan FSA, being the regulator and administrator of the centre, ensures that these businesses are undertaken in an orderly and prudent manner.

6. In this regard, prospects would need to obtain Labuan FSA’s prior approval for any proposed digital business if the activities fall within the ambit of Labuan Financial Services Securities Act 2010 or Labuan Islamic Financial Services Securities Act 2010. It is also required that the entities adhere to anti money laundering and terrorism financing standards to ensure the digital setups are not abused for such purposes.

7. The regulatory aspects of such digital businesses demand that the business is properly managed through, for example, having sufficient capital resources, having adequate internal controls, and having strong risk management and governance. These robust measures are needed to mitigate the many inherent risks that are brought about by the very nature of digital business, such as limited human interface, its reach, technological changes, speed, and cyber risks.

8. With this in mind, Labuan FSA is developing a framework of regulations for the Labuan digital financial business which have been recently issued as exposure drafts for market consultation covering:

• Guidelines on Licensing Requirements for Labuan Digital Financial Services; and
• Guidelines on Regulatory Requirements for Labuan Digital Financial Services.

9. These Guidelines will complement and further enhance the current regulatory requirements particularly in the areas of governance, cyber risk management and market conduct to ensure Labuan digital financial services are carried out in a sound, transparent and professional manner in Labuan IBFC.

10. Other than the digital market space, Labuan IBFC is home to more than 6000 active entities which include banks, insurance and insurance related entities, trust companies and many other business sectors. As a business and financial centre, Labuan has been positively regarded with its reputation as a well-regulated and business–friendly jurisdiction. We firmly believe that it will only benefit the players, including digital players, that this reputation be maintained to enable businesses to be sustainable for the long-term. Therefore, Labuan FSA will need to vigilantly ensure that players adhere to guidelines and regulations to maintain the stability, safety and soundness of the Centre.

Ladies and Gentlemen,

11. Having espoused on the need for good governance, I can assure you that Labuan FSA will always work together with industry to further evolve the centre’s aspiration to embrace the digital wave. We will continue to engage with the industry towards creating a strong and sustainable digital business future particularly for the Asian region. Recently, we had a fruitful and informative engagement session with all the fintech players of Labuan IBFC on developments relating to the digital marketplace in the centre. Arising from this engagement, a Labuan FinTech association will be established, which is akin to the other associations of players, to further enhance the collaboration between Labuan FSA and the players to develop and spur innovations in the digital space.

12. Indeed, today’s conference can also be regarded as an engagement session with the stakeholders of the industry. We all need to keep abreast of the new technologies being adopted, application platforms that are being built and new business spaces, to further value-add to the business propositions and offerings of Labuan IBFC digital marketplace.

13. On that note, I thank you all once again for your presence here today, and I wish everyone a productive and insightful day ahead.

Thank you.