This article first appeared in The Edge Malaysia Weekly on November 5, 2018 - November 11, 2018

IN September, property developer Country Heights Holdings Bhd made an announcement that caused quite a stir in the investing community. The company boldly declared that it was looking to make an initial coin offering (ICO) in order to issue its own cryptocurrency called “Horse Currency” and is seeking the support and endorsement of its shareholders.

The plan is to issue one billion horse currencies backed by RM2 billion worth of the company’s assets with an initial 300 million open to the public for circulation.

Country Heights will be holding an extraordinary general meeting (EGM) on Thursday, Nov 8, at which it will explain its ICO plan to shareholders and seek their endorsement.

Globally, only a handful of public-listed companies have successfully launched ICOs, which explains why the property developer’s proposal for the unconventional means of fundraising surprised the general public and investing community.

Although cryptocurrencies have been making the news, there is a lot of scepticism over their legitimacy and sustainability. However, Country Heights executive chairman Tan Sri Lee Kim Yew believes Malaysia, specifically its private sector, is ready for fundraising via digital coins. He says he will take the ICO elsewhere if the local authorities are not keen on it.

“If they are not going to get involved, it’s their problem. I’m the private sector. If they don’t want to embrace it, it’s their loss. If they don’t agree with it, I won’t do it in Malaysia. I can go to other countries to do it ... but that is not my priority because I have [the] nation’s interest at heart,” he points out.

The property tycoon says the ICO will be made in ringgit but adds that the valuation of the digital coin will only be disclosed at the EGM.

The ICO will be open to the public for subscription and the coins can be used at the hospitality services in its portfolio, for example, the Palace of the Golden Horses for dining at its restaurants, golf membership, private jet trips, at the Car City Centre, and for medical treatments and checks at the Golden Horses Health Sanctuary, among other things.

When contacted, the Securities Commission Malaysia (SC) says it has engaged with Country Heights and that the company has yet to provide it with details of the proposed ICO. It is worth noting that fundraising comes under the SC’s purview.

However, Lee says the regulatory body has not asked for a proposal. He also shares that he will be meeting Bursa Malaysia to propose an exchange centre for cryptocurrency in Malaysia.

The property tycoon’s confidence in digital tokens and the blockchain technology that underpins them seems unwavering. “Blockchain reduces cost and red tape. It can curb money laundering and corruption because it’s transparent. If I write a cheque now, it will take three to four days to clear. With blockchain, it’s immediate!

“I’ve come to the conclusion that if blockchain technology is widely used, it will become a machine of trust and integrity. This is what people will be looking for because blockchain is a distribution ledger and it records everything,” he says excitedly.

Currently, blockchain technology is most commonly associated with digital tokens. While there are some banks that are experimenting with blockchain for certain banking services, it is still far from becoming mainstream.

Nevertheless, Lee believes that digital coins could one day replace legal tender, although that might take a long time.

Apart from sincerely hoping for the country to be at the forefront of blockchain technology and not miss out on its merits, Lee also admits that part of his inspiration to raise funds through an ICO is due to personally experiencing the “monopoly” of the banking system.

“Banks need to be fair and bring down their profit. They are making too much profit and businesses are suffering! Blockchain will give banks competition rather than allow them to monopolise the system. The only thing that is ‘protecting’ them is the licence they have,” he says.

Lee shares that Country Heights has borrowings of RM200 million, of which RM100 million is owed to him personally because of the group’s recent tax issues while the other RM100 million is owed to the banks.

“That loan [from the banks] was taken during the Asian financial crisis in 1998 and still hasn’t been paid off. We just can’t get out of the banking system. The average interest rate we are paying is about 9% to 10%. All our lives, we are working for the banks,” he laments.

He also says Country Heights is in a tight cash-flow situation. It managed to raise RM25 million not too long ago but the clearly frustrated Lee says the company has to pay an effective interest rate of about 14%.

As for the tax issues, recall that in May last year, the Inland Revenue Board seized Lee’s fixed deposits placed with a foreign bank amounting to about RM126 million to settle tax liabilities of RM22.5 million in relation to Country Heights Sdn Bhd, a unit of Country Heights.

According to Country Heights’ 2017 annual report, the group had received an extension of funding support from Lee, a major shareholder, in the form of an unsecured non-current term loan amounting to RM111.14 million.

Should Country Heights be successful in its ICO exercise to initially raise 300 million horse currencies, Lee says part of the plan is to pare down the company’s borrowings by returning the RM100 million owed to him.

“I want to be paid the RM100 million owed to me because I personally owe another bank RM90 million. It is only RM90 million gearing and they (the bank) want to take me to court. I also have assets but it’s so difficult to raise funds because you don’t have political connections in this country.

“I am one of the lowest geared persons now in society. But even with this new government, I find that it’s hard for me to raise funds,” he adds.

When asked why he does not sell off some of the group’s assets to pare down the debt, the tycoon replies, “That is my choice. I’m an entrepreneur. If selling is good for the company, I’ll do it. But if it doesn’t do the company any good, then I won’t.

“Business is not all about making money but also about building dreams. Those who like to borrow and sell, they become poor and unprogressive.”

According to Lee, a successful ICO of one billion horse currencies would mean that half of that can be used as Country Heights’ “war chest fund” for all the projects that he has in the pipeline.

Some are also wondering at Country Heights’ idea of an asset-backed cryptocurrency if that is possible, given that the assets it is backed against belong to shareholders of the company.

“Yes, the RM2 billion assets belong to the public-listed company. I am the major shareholder by the way but when we raise one billion horse currencies, they will go back to the shareholders, not me (personally),” Lee says defensively.

He also believes the company’s shareholders will welcome the ICO and does not see himself garnering support for it.

What about the regulators? Both the SC and Bank Negara Malaysia had issued stern warnings about ICOs previously.

“Both authorities will continue to monitor these developments, and will not hesitate to take action against any person conducting illegal or unauthorised activities,” says a joint statement issued by the SC and Bank Negara on the matter in January.

While Lee continues to envision his grand plan for the ICO and Country Heights, how this will play out will be interesting to watch.

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