Malaysia Crypto Assets Regulatory Framework and Market Landscape

Regulatory Framework

Malaysia adopts a "dual regulation" model for Crypto Assets, primarily overseen by Bank Negara Malaysia and the Securities Commission Malaysia. Bank Negara is responsible for monetary policy and financial stability, not recognizing privately issued digital currencies as legal tender. The Securities Commission includes eligible Crypto Assets in the capital market regulatory framework, regulating them as securities products.

The legal basis for the regulatory system comes from the "2007 Capital Markets and Services Act, effective January 2019, Digital Currency and Digital Tokens as Securities ( Order." This decree grants the Securities Commission regulatory authority and stipulates that Crypto Assets with certain investment attributes can be regarded as securities. Subsequently, the Securities Commission has issued 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, robust risk control mechanisms, anti-money laundering measures, and KYC processes. Additionally, a "digital asset custodian" system has been introduced, requiring institutions engaging in asset custody services to possess the relevant licenses.

For wallet services, if they only provide decentralized software wallet functions, they are not subject to regulation; however, if they also include fiat currency exchange or custody functions, they need to obtain the appropriate payment or custody qualifications.

Exchange Regulation and Market Structure

As of 2025, Malaysia has a total of 6 licensed digital asset exchanges approved by the Securities Commission, including:

1. Luno Malaysia - The compliance platform with the highest market share.
2. SINEGY - A local exchange characterized by compliance and security.
3. Tokenize Malaysia - Operations covering Malaysia, Singapore, Vietnam, and other regions
4. MX Global - A local trading platform previously invested by Binance
5. HATA Digital - The 5th licensed DAX with independent USD market trading capabilities.
6. Torum International - The 6th DAX, positioned as a "social + financial" platform

These platforms are all recognized market operators that are connected to the local banking system, supporting deposits, withdrawals, and coin exchanges in Malaysian Ringgit.

As of early 2025, there are 22 types of Crypto Assets approved for trading, covering mainstream coins, public chain coins, DeFi coins, etc. It is worth noting that no stablecoins or privacy coins have been approved for trading.

Capital In and Out Mechanism and Foreign Exchange Control

Licensed exchanges in Malaysia support deposits and withdrawals in the local currency, Malaysian Ringgit. Users can deposit fiat currency into their exchange accounts via local bank transfers, or sell their held Crypto Assets and withdraw the proceeds in Ringgit to their bank accounts.

To prevent the outflow of funds through Crypto Assets, regulatory authorities have implemented strict measures on exchanges:

• Only transactions priced in Ringgit are allowed.
• Withdrawals are limited to local bank accounts.
• Crypto Assets withdrawal requires additional review

These designs effectively prevent Crypto Assets from becoming tools for fund transfer, and the basic regulatory stance is "do not prohibit trading activities, but control cross-border use".

Custody Model and Customer Asset Protection

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

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 this mechanism, most platforms relied on third-party international custodians to safeguard digital assets.

Regulatory requirements for all licensed exchanges:

• Maintain a 1:1 reserve ratio
• Implement regular asset audits and reserve proof report disclosures
• The platform is prohibited from engaging in any form of customer asset lending or leveraged investment activities.

Market Status and Platform Competition Landscape

The cryptocurrency market in Malaysia has shown a robust growth trend in recent years. By the end of 2021, the annual trading volume of the national crypto market reached approximately 21 billion ringgit. In 2022, the number of new digital asset trading accounts reached 128,000.

In terms of the competitive landscape of the platform, it presents a highly concentrated structure. Luno Malaysia, as the earliest approved exchange, has maintained an absolute leading position in the market. The market share of other exchanges is relatively limited, but they each have their own characteristics and development paths.

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

The Use of Unlicensed Platforms and Regulatory Attitudes

Despite Malaysia's establishment of a strict licensing system, some experienced investors are still using unregistered overseas platforms such as Binance, Huobi, and Bybit. These platforms offer a wider range of trading coins, leverage tools, and financial derivatives, making them highly attractive to high-frequency traders and users seeking high returns.

In response to this situation, the Malaysian Securities Commission has taken a graduated regulatory approach:

1. Investor Warning List System
2. Formal Law Enforcement and Injunctions
3. The combination of technical and financial means of blockade
4. Investor Education and Public Warning

Overall, Malaysian regulators adopt a zero-tolerance attitude towards unlicensed trading platforms, establishing a regulatory bottom line of "compliance as the foundation, risk at one's own expense" through a combination of administrative orders, financial blockades, and public opinion propaganda.

Token Issuance System and IEO Platform Regulation

Malaysia adopts a highly prudent compliance system design for the issuance of digital tokens. All token issuance activities involving public fundraising are regarded as securities issuance and must fall under the regulatory framework of the Capital Markets and Services Act. The core of this mechanism is the introduction of the "Initial Exchange Offering )IEO(" platform model, to replace the gaps in project review and the weak investor protection found in traditional ICOs.

According to the requirements of the Securities Commission, companies intending to issue tokens through IEO must meet conditions such as registration and operating location, minimum paid-in capital, corporate governance and equity structure, and compliance character standards.

As of 2025, two platforms have obtained IEO registration licenses: Pitch Platforms Sdn Bhd and Kapital DX Sdn Bhd. All public digital token issuances must go through such platforms for project declaration, white paper disclosure, fundraising implementation, and token delivery.

The types of tokens that can be issued are mainly divided into three categories: functional tokens, security tokens, and asset tokenization tokens. Although the essence of tokens is diverse, the securities commission uses "whether it involves financing activities and expectations of investment returns" as the core judgment criterion, and sets corresponding legal boundaries for their issuance and circulation.

Token Trading and Listing Mechanism

The Securities Commission clearly stipulates that digital tokens issued by IEO platforms, if intended for circulation in the public market, must be listed for trading on licensed digital asset exchanges. This mechanism ensures that all token trading activities open to the public are conducted in a regulated environment.

The listing of tokens must simultaneously meet the dual review of regulatory agencies and exchanges. The listing process includes regulatory filing and approval, internal review by the exchange, listing, and announcement mechanisms, etc.

To prevent market manipulation, insider trading, and other behaviors in the circulation of tokens listed on exchanges, the Securities Commission has established a supporting secondary market continuous supervision system, which mainly includes anti-money laundering and real-name system requirements, market manipulation monitoring mechanisms, and continuous disclosure obligations.

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. Against the backdrop of multiple global markets experiencing platform explosions or asset loss due to regulatory lag, Malaysia has built a relatively safe and sustainable digital finance ecosystem with its forward-looking and robust regulatory model.

Looking ahead, there is still room for growth in the number of IEO platforms and the types of projects; whether more stablecoins and RWA-type assets are opened for listing will depend on policy risk assessments and actual market feedback. The continued increase in public participation also relies on the positive demonstration of successful projects and the in-depth promotion of policy advocacy.

In the trend of increasingly tightening global crypto regulation, Malaysia may attract more local and regional enterprises to adopt compliant paths for the issuance and trading of digital assets, thanks to its institutional stability and legal clarity, thereby promoting itself to become one of the digital financial centers in Southeast Asia.