(March 24): Two participants of Securities Commission (SC) Malaysia’s inaugural regulatory sandbox are set to introduce new solutions to supply chain financing that can benefit investors and smaller businesses. 

Virtual Economy Technology Sdn Bhd, the company behind V Systems, is developing a supply chain platform by working with one of the largest local banks to launch its initial phase. A Memorandum of Understanding is expected to be signed soon.
 
PeerHive (M) Tech Sdn Bhd, meanwhile, is testing a decentralised peer-to-peer (P2P) financing protocol that replaces the traditional trustee model with smart contracts, allowing investors to fund and invest in small and medium enterprise (SME) loans with stablecoin. 

Both platforms sit under the sandbox's alternative financing track and have been given approximately 12 months to deploy and assess their models under regulatory supervision. 

Wealth speaks to both players on what they are building and what it could mean for investors:

V Systems joined the SC’s regulatory sandbox with a blockchain-based supply chain financing platform aimed at extending credit deeper into SME supply chains.

The company is currently working with one of the largest local Malaysian banks to launch the initial phase of the platform, says its CEO Goh Yuen Khai. Banks are the primary financiers, using their existing credit lines to fund suppliers against confirmed invoices. 

But the platform also includes a liquidity pool open to corporate treasuries, investment funds and family offices — broadening the financing base and introducing competition that could lower borrowing costs for suppliers.

The liquidity pool will initially be restricted to fewer than 10 participants during the sandbox period. 

"We work with the banks to lay out the infrastructure — financing the buyer and supplier, writing all the bank credit lines to start off with.

“In a few months, we will start building the liquidity pool. That's where we look at how we can approach the whole financing, not just riding on a bank's product.

“It's not a bank's platform; it's alternative financing that we can bring. The banks are welcome to participate, and we'll continue to work with them. But we want to make sure the underlying flow is ready first," says Goh.

For corporate treasuries, the pool offers a more efficient alternative to early payment arrangements, says Goh.

Traditionally, a large buyer that wants to help its suppliers get paid early would use its own cash to settle invoices at a discount — paying RM90,000 instead of RM100,000. 

But this lowers the recorded cost of goods purchased: the company books RM90,000 rather than RM100,000 as an expense, which means its profit margin — and therefore its taxable income — is higher than it would otherwise be.

Under the liquidity pool model, the investors — corporate treasuries, investment funds and family offices instead — allocate funds into the pool as an investment. 

The pool finances the supplier, and at maturity the buyer's procurement department still pays the full invoice amount as originally agreed. The treasury gets its capital back plus a return, while the original purchase value is preserved in the company's accounts.

Supply chain financing itself is not new. Rather than lending against the SME's own creditworthiness, it ties financing to the large buyer at the end of the supply chain, allowing even small suppliers to access credit at lower rates.
 
However, the model has its own problems — financing rarely reaches beyond first-tier suppliers, manual processes create bottlenecks and poor transparency opens the door to double financing.

With V System’s solution, the underlying financial structure does not change. The model still relies on the anchor buyer's creditworthiness, and suppliers still receive financing against confirmed invoices. 

What changes is how transactions are recorded, verified, and financed, says Goh.   

Goh explains that the process begins when a buyer confirms an invoice, but payment is only due at a later date. The invoice is uploaded to the platform and tokenised on the blockchain, becoming a digital asset representing the payment obligation, complete with a maturity date.

The supplier receives a token for the full invoice amount. The token represents a confirmed receivable backed by the anchor buyer's creditworthiness, which means suppliers can obtain financing based on the buyer's credit risk rather than their own.

For example, if a supplier is owed RM100,000 and payment is due in three months, the supplier receives a token representing that RM100,000 claim. 

The buyer's acknowledgement is recorded on-chain, visible to other financial institutions, and the system prevents the same invoice from being financed twice.

"You put it into our platform, we put it on blockchain, then we send this token to the supplier with the maturity date according to the invoice. For example, if you're supposed to get paid three months later, you still get it three months later. 

“I have a clear platform showing that the company has acknowledged this and given you this token amount. Once it's on the blockchain, you know there will be no more additional [issuance against the same invoice]," says Goh.

Because the invoice exists as a token, the supplier does not need to draw down financing for the full amount at once. In conventional supply chain financing, a supplier typically receives a single lump-sum advance against the invoice. With tokenisation, it can draw smaller amounts as cash flow needs arise — requesting a partial advance today and another tranche later — up to the total invoice value, with each drawdown recorded on-chain against the same token. 

The token can also be transferred down the supply chain — passed from one supplier to the next — meaning even an SME several tiers removed from the anchor buyer can access financing at the buyer's credit risk, not their own.
 
Goh says this creates deep-tier financing, where credit becomes accessible across multiple levels of a supply chain rather than only to direct suppliers.

"Historically, you can't do deep-tier transfers as every transfer has to be recorded, and banks simply can't handle that manually. But once you put it on a token, it can move around automatically. Financing is based on the buyer's risk, not the supplier’s, and it's not only single tier. This can go multi-multi-tier, all the way down to a logistics guy or a small retail shop. 

"They are able to access financing because they hold the token, and holding the token means holding the right to receive payment from the buyer on maturity date. We can track that, we can trace that, everything is shown on the blockchain,” he says. 

“The rate is based on the buyer's risk, so it will be much cheaper and I don't need their credibility to fund that, because I'm funding the token," he adds. 

PeerHive is aiming to secure a full Recognised Market Operator (RMO) licence from the SC after completing its regulatory sandbox. It is testing a decentralised finance protocol built on smart contracts. 

The protocol is designed to bypass intermediary costs, without the need for a trustee, thereby ensuring more interest paid by the borrowers goes directly to the investors, says Vincent Yeo, CEO and co-founder of PeerHive. 

He says each investment note hosted on PeerHive has its own dedicated smart contract, into which all rules governing fund flows and returns are programmed. 

So, when a borrower makes a repayment, the smart contract automatically calculates and distributes the principal and interest owed to each investor. Because every transaction is recorded on the blockchain, investors can see exactly where their money goes and who the end borrower is.

Yeo estimates potential yields of around 10% to 12%, with credit default the primary risk if borrowers fail to repay.
 
"When we use smart contracts, we're able to circumvent the use of a trustee within the ecosystem. All funds go through a smart contract, which then transacts directly from lenders to borrowers in a one-way flow, without us touching or transferring the money. PeerHive acts purely as the administrator of the smart contract itself," says Yeo. 

PeerHive’s platform is open to both retail and institutional investors. It currently has around RM1 million in identified borrowers waiting to be funded once the platform begins operating, and has already engaged three institutional investors who are considering deploying capital through the platform.

During the sandbox period, PeerHive aims to scale its loan book to around RM5 million, achieve an 85% investment note fulfilment rate and validate product-market fit, while maintaining zero technical errors on its smart contract infrastructure.

To the investor, Yeo says, the platform would look familiar as they would still browse and select investment notes as they do on existing P2P platforms. 

He says investors would deposit ringgit into a PeerHive wallet via a payment gateway, which would then be converted into MYRC — a Malaysian ringgit-pegged stablecoin — on a one-to-one basis. From there, investors can browse available investment notes and allocate funds to the opportunities they prefer.
 
For investors who already hold crypto, they can deposit MYRC directly from an external wallet into the platform.

MYRC is issued by Blox Blockchain Sdn Bhd, a Malaysian fintech that backs the stablecoin one-to-one with ringgit. When a non-crypto investor deposits ringgit through PeerHive's payment gateway, Blox mints the equivalent in MYRC and credits it to the investor's platform wallet.

From there, investors allocate their MYRC to a lending pool tied to a specific investment note, each governed by its own smart contract. Once a campaign hits a set threshold the borrower can withdraw directly from the smart contract.

PeerHive issues no payment instructions and handles no funds.

"Smart contracts can only transact using crypto or stablecoins, you cannot use fiat directly unless the currency is crypto-ready, which it isn't at this point. So, all interactions with the smart contract have to be done through cryptocurrency, in this case a stablecoin. 

“We don't use other cryptocurrencies like Bitcoin or Ethereum because they are too volatile, and that volatility would push borrowers away," explains Yeo.

As at the time of writing, Blox isn’t a participant of the Bank Negara Malaysia’s Digital Asset Innovation Hub. However, it was a participant of the PayNet Fintech Hub, the country’s first fintech-focused community and accelerator programme. 

PayNet is Malaysia’s national payments network and the shared central infrastructure for the country’s financial market with BNM as its largest shareholder, alongside 11 Malaysian financial institutions.