Overview of Malaysia's Crypto Assets and Token Regulatory Framework

I. Regulatory Framework

Malaysia adopts a "dual regulatory" model for Crypto Assets, with the Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC) jointly assuming regulatory functions. BNM is responsible for monetary policy and financial stability and does not recognize privately issued digital currencies as legal tender. The SC includes qualified Crypto Assets in the capital market regulatory framework and regulates them as securities products.

The legal basis of the regulatory system comes from the "2007 Capital Markets and Services Act (Digital Currency and Digital Token as Securities) Order" that took effect in 2019. The SC has issued several supporting regulations, including the "Guidelines for Recognized Market Operators" and the "Digital Asset Guidelines," to regulate digital asset exchanges, IEO platforms, and digital asset custody services.

In terms of specific regulatory measures, digital asset trading platforms (DAX) must register as recognized market operators (RMO-DAX) and meet high compliance standards. SC has also introduced a "Digital Asset Custodian (DAC)" system, requiring institutions engaged in asset custody services to possess the relevant licenses.

2. Exchange Regulation and Market Structure

By 2025, Malaysia will have a total of 6 licensed Digital Asset Exchanges (DAX) approved by the SC, including Luno Malaysia, SINEGY, Tokenize Malaysia, MX Global, HATA Digital, and Torum International. These platforms support deposits, withdrawals, and currency exchanges in Malaysian Ringgit (MYR).

The approved types of Crypto Assets for trading are 22, covering mainstream coins, public chain coins, and DeFi coins, among others. It is worth noting that no stablecoins or privacy coins have been approved for trading. Luno is the platform with the most listed Tokens, almost encompassing all regulated coin types.

3. Capital In and Out Mechanism and Foreign Exchange Control

Licensed exchanges support deposits and withdrawals in Malaysian Ringgit (MYR). Users can deposit fiat currency into the exchange account through local bank transfers, and they can also sell Crypto Assets and withdraw them as MYR.

To prevent the formation of capital outflow channels through Crypto Assets, regulatory authorities have implemented the following measures on exchanges:

• Only MYR-denominated transactions are allowed
• Withdrawals are limited to local bank accounts.
• Crypto Assets withdrawal review

4. Fund Custody Model and Client Asset Protection

All licensed exchanges in Malaysia adopt a centralized custody trading model. The platform must ensure that client assets are strictly separated from the company's assets and implement appropriate cold wallet/multi-signature custody mechanisms.

SC has introduced a "Digital Asset Custodian (DAC)" system, setting specific regulatory thresholds for institutions providing Token custody services. Most platforms adopt the method of entrusting third-party international custodians to manage digital assets.

The SC requires all licensed exchanges to maintain a 1:1 reserve ratio, implement regular asset audits and reserve proof report disclosures, and prohibits platforms from engaging in any form of customer asset lending or leveraged investment activities.

V. Market Status and Competitive Landscape of Platforms

The cryptocurrency market in Malaysia is showing a robust growth trend. Luno Malaysia, as the absolute leader in the market, has surpassed 1 million registered users, with an annual trading volume of 87 billion ringgit, accounting for over 90% of the entire licensed exchange market. Other exchanges such as Tokenize Malaysia and MX Global each have their own characteristics and development paths.

From the perspective of investor profiles, retail users are predominant, with a clear trend towards younger demographics. Investors under the age of 45 account for over 72% of DAX accounts, reflecting that this market is primarily composed of digital native users.

6. Usage Phenomena and Regulatory Attitudes of Unlicensed Platforms

Despite the establishment of a strict licensing system, some investors are still using overseas unregistered platforms. The SC has adopted a gradual regulatory approach, including an investor warning list system, formal law enforcement and injunctions, the blocking of technical and financial means, as well as investor education and public admonitions.

Overall, Malaysian regulators have adopted a zero-tolerance attitude towards unlicensed trading platforms, establishing a regulatory bottom line of "compliance as the foundation, risk borne by oneself" through a combination of administrative orders, financial blockades, and public opinion propaganda.

7. Token Issuance System and IEO Platform Regulation

Malaysia adopts a highly prudent compliance system design for the issuance of digital tokens, introducing the "Initial Exchange Offering (IEO)" platform model. Companies intending to issue tokens through IEO must meet conditions such as registration and operational location, minimum paid-up capital, corporate governance and equity structure, and compliance character standards.

By 2025, two platforms have obtained IEO registration licenses: Pitch Platforms Sdn Bhd (brand name pitchIN) and Kapital DX Sdn Bhd (referred to as KLDX). The IEO platform is responsible for the full process due diligence and subsequent supervision of the issuing projects.

8. Types of Issuable Tokens and Their Legal Status, Market Practices and Case Analysis

The Malaysian Securities Commission classifies tokens into three categories: functional tokens, securities tokens, and asset tokenization tokens. All token issuances involving fundraising activities must be compliant and issued through a licensed IEO platform.

Since the IEO platform went live in early 2023, Malaysia has seen several representative compliant Token issuance projects, such as Integra Healthcare fixed income Token and BidNow platform Token. As of the end of 2024, the scale of the IEO market in Malaysia is still in its early stages, with a limited number of projects but a high degree of compliance.

9. Token Trading and Listing Mechanism

Digital tokens issued by the IEO platform must be listed on a licensed Digital Asset Exchange (DAX) if they are to circulate in the public market. The token listing must meet the dual review requirements of both regulatory authorities and exchanges.

SC has established a supporting secondary market continuous supervision system, which includes anti-money laundering and real-name system requirements, market manipulation monitoring mechanisms, and continuous disclosure obligations. If any abnormal or illegal activities are detected, DAX may be legally ordered to suspend trading, temporarily delist, or revoke listing qualifications.

10. Summary and Outlook

Malaysia's digital asset regulatory system has gradually formed a relatively complete compliance framework, covering the entire process of regulation from Crypto Assets trading, asset custody to Token issuance. The establishment of the IEO system provides institutional guarantees for the legal circulation of digital assets and compliant fundraising.

Looking to the future, there is still room for growth in the number of IEO platforms and project types. Amid the tightening trend of global crypto regulation, Malaysia may attract more local and regional enterprises to adopt compliant paths for digital asset issuance and trading due to its institutional stability and legal clarity, thereby promoting itself to become one of the digital finance hubs in Southeast Asia.