Overview of Malaysia's Digital Asset Regulatory System

1. Regulatory Framework

Malaysia adopts a "dual regulatory" model for cryptocurrencies, primarily overseen by Bank Negara Malaysia and the Securities Commission. Bank Negara is responsible for monetary policy and financial stability, and does not recognize privately issued digital assets as legal tender. The Securities Commission includes qualified crypto assets in the capital market regulatory framework, treating them as securities products for regulation.

The legal basis of the regulatory system comes from the "2007 Capital Markets and Services Act (Digital Currency and Digital Tokens as Securities) Order" that took effect in 2019. This order grants the Securities Commission regulatory authority and stipulates that crypto assets meeting investment attributes can be considered as securities. Subsequently, the Securities Commission has released a series of supporting regulations, including the "Guidelines for Recognized Market Operators" and the "Digital Asset Guidelines," which regulate digital asset exchanges, IEO platforms, and digital asset custody services.

In terms of specific regulatory measures, Malaysia has clear licensing thresholds. Digital asset trading platforms must register as recognized market operators and meet high compliance standards, including local registration, minimum capital requirements, risk control mechanisms, anti-money laundering measures, and KYC processes. In addition, a "digital asset custodian" system has been introduced, requiring institutions engaged in asset custody services to possess the relevant licenses.

2. Exchange Regulation and Market Structure

As of 2025, Malaysia has a total of 6 licensed digital asset exchanges approved by the Securities Commission, including Luno Malaysia, SINEGY, Tokenize Malaysia, MX Global, HATA Digital, and Torum International. These platforms are all recognized market operators, connected to the local banking system, and support deposits, withdrawals, and currency exchanges in Malaysian Ringgit.

As of early 2025, there are 22 types of cryptocurrencies approved for trading, including mainstream coins, public chain coins, and DeFi coins. It is worth noting that no stablecoins or privacy coins have been approved for trading, indicating that regulatory agencies are taking a cautious approach to currency selection.

In terms of market structure, Luno Malaysia, as the first approved exchange, has maintained an absolute leading position in the market. Other exchanges such as Tokenize Malaysia, MX Global, and HATA Digital are also developing their own features in their respective fields. Overall, the compliant market in Malaysia is still dominated by Luno, while other platforms are developing in a differentiated manner.

3. Capital In and Out Mechanism and Foreign Exchange Control

Licensed exchanges in Malaysia generally support deposits and withdrawals in the local currency, the Malaysian Ringgit. Users can deposit fiat currency into the exchange account via local bank transfers and can also sell cryptocurrency assets for withdrawal to their personal bank accounts. At the same time, investors can transfer compliant cryptocurrencies from their personal on-chain wallets to the exchange for trading.

To prevent the formation of capital outflow channels through digital assets, regulatory authorities have implemented strict measures for exchanges: only transactions priced in ringgit are allowed, and pricing in US dollars or other foreign currencies is prohibited; fiat withdrawals must be transferred to a local bank account in the user's own name; cryptocurrency withdrawals must undergo a delay or additional review process. These designs effectively prevent digital assets from becoming tools for capital transfer.

4. Fund Custody Model and Client Asset Protection

All licensed exchanges in Malaysia adopt a centralized custody trading model. The Securities Commission has introduced a "digital asset custodian" system, establishing specific regulatory thresholds for institutions providing token custody services. Before the full implementation of the system, most platforms entrust third-party international custodians to safeguard digital assets.

Regulatory requirements mandate all licensed exchanges to maintain a 1:1 reserve ratio, implement regular asset audits and reserve proof report disclosures, and prohibit platforms from engaging in any form of customer asset lending or leveraged investment activities. This system design is of significant importance for safeguarding investor confidence.

V. Token Issuance System and IEO Platform Regulation

Malaysia adopts a highly prudent compliance system design for digital token issuance. All token issuance activities involving public fundraising are regarded as securities issuance and must be included in the regulatory framework under the Capital Markets and Services Act. The core is to introduce the "Initial Exchange Offering (IEO)" platform model to replace the issues present in traditional ICOs.

Companies intending to issue tokens through an IEO must meet conditions regarding their registered location, minimum paid-in capital, corporate governance, and equity structure. IEO platforms are included in the "recognized market operators" system and are required to perform full-process due diligence and subsequent supervision responsibilities.

The types of tokens that can be issued include utility tokens, security tokens, and asset-backed tokens. Even utility tokens, if their issuance involves fundraising activities, must still be regulated as securities. Security tokens and asset-backed tokens must comply with stricter regulatory requirements.

6. Token Trading and Listing Mechanism

After the issuance of digital tokens on the IEO platform, if they are intended to circulate in the public market, they must be listed and traded on licensed digital asset exchanges. The token listing must meet the dual review requirements of regulatory agencies and exchanges. The listing process includes regulatory filing and approval, internal review by the exchange, and listing announcement, among other steps.

Functional tokens and security tokens have no significant differences in their circulation mechanisms after being listed on exchanges; both are subject to market supply and demand to determine price trends. To prevent market manipulation and other behaviors, the Securities Commission has established a supporting continuous regulation system for the secondary market, including anti-money laundering requirements, market manipulation monitoring mechanisms, and ongoing disclosure obligations.

7. Future Outlook

Malaysia's digital asset regulatory system has formed a relatively complete compliance framework, covering the entire regulatory process from cryptocurrency trading, asset custody to token issuance. In the future, there is still room for growth in the number of IEO platforms and project types; whether more stablecoins and RWA-type assets will be open for listing will depend on policy risk assessment and actual market feedback.

Under the trend of tightening global cryptocurrency regulations, Malaysia may attract more local and regional companies to adopt compliant paths for digital asset issuance and trading by leveraging its institutional stability and legal clarity, thereby promoting itself to become one of the digital financial centers in Southeast Asia.