By: Sonny Zulhuda
I was recently asked to comment on digital crowdfunding in Malaysia from a cyber law perspective. By way of context, my comments focus specifically on donation-based crowdfunding, as distinct from other models such as equity-, reward-, debt-, or royalty-based crowdfunding. While donation-based crowdfunding has become increasingly popular in Malaysia, its operation must be conducted properly, ethically, and transparently.
From the perspective of funders, there is a legitimate expectation that donated funds will be channelled strictly towards their stated purposes and not be abused or misused. To support this expectation, crowdfunding initiatives should preferably be conducted through a recognisable online platform, rather than informal or ad-hoc methods such as direct messaging. An online platform—whether in the form of a dedicated website, blog, social media page, or a specific application—provides the necessary infrastructure for accountability and governance.
Such platforms allow for the imposition of minimum regulatory or self-regulatory mechanisms, including, but not limited to:
- Disclosure obligations, covering the purpose of the fundraising, the identity of the organiser or platform operator, and the intended beneficiaries;
- Clear notice of terms and conditions governing the crowdfunding initiative;
- Transparent payment mechanisms and methods;
- Record-keeping obligations to ensure traceability of funds;
- Personal data protection safeguards, in line with applicable data protection laws; and
- Accessible channels for communication, inquiries, or complaints.
In this respect, valuable lessons can be drawn from the regulatory approach applied to online marketplaces, particularly in relation to protecting online consumers with more transparency, accountability, and consumer trust.
Once these foundational requirements are in place, the next consideration is monitoring and oversight. Such oversight should logically fall within the purview of the relevant authorities, depending on the subject matter of the crowdfunding initiative—whether it relates to education, religious causes, disaster relief, or even political activities.
At the same time, any regulatory framework must be carefully calibrated. Over-regulation may risk discouraging charitable giving and undermining the social value of donation-based crowdfunding. The challenge, therefore, lies in striking an appropriate balance between facilitating generosity and ensuring legal accountability, transparency, and public trust.
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