Current Status of Crypto Assets Regulation and Trading in Malaysia

1. Regulatory Framework

Malaysia adopts a "dual regulatory" model, jointly regulated by the Bank Negara Malaysia (BNM) and the Securities Commission (SC) for Crypto Assets. BNM is responsible for monetary policy and financial stability, and does not recognize crypto assets as legal tender. The SC includes qualifying crypto assets into the capital market regulatory framework, treating them as securities products.

The regulatory system is based on the "2007 Capital Markets and Services Act effective in 2019 ( Digital Currency and Digital Tokens as Securities ) Order." The SC subsequently issued several supporting regulations, including the "Guidelines for Recognized Market Operators" and the "Digital Asset Guidelines," which regulate exchanges, IEO platforms, and custodial services.

Specific regulatory measures include:

• The trading platform must be registered as an approved market operator (RMO-DAX)
• Introduce the digital asset custodian system (DAC)
• Require the exchange to meet compliance, capital, risk control, and other requirements.
• Differentiate treatment for wallet services, software wallets are temporarily not included in regulation.

2. Exchange Regulation and Market Structure

As of 2025, Malaysia has 6 licensed digital asset exchanges approved by the SC ( DAX ):

1. Luno Malaysia
2. SINEGY
3. Tokenize Malaysia
4. MX Global
5. HATA Digital
6. Torum International

These platforms support the recharge, withdrawal, and exchange of Malaysian Ringgit ( MYR ).

The SC has approved 22 types of Crypto Assets for trading, including mainstream coins, public chain coins, and DeFi coins, but excluding stablecoins and privacy coins. Luno supports the most coins, nearly covering all regulated coins.

3. Capital In and Out Mechanism and Foreign Exchange Control

Licensed exchanges support MYR deposits and withdrawals. Users can recharge via bank transfer or sell crypto assets to withdraw to their own bank accounts. Fund transfers require real-name verification and anti-money laundering review.

To prevent capital outflow, regulators have taken the following measures:

• Only MYR-denominated transactions are allowed, foreign currency trading pairs such as USD are prohibited.
• Fiat withdrawals are limited to local bank accounts.
• Crypto Assets withdrawal requires additional review

4. Fund Custody Model and Client Asset Protection

The licensed exchange in Malaysia adopts a centralized custody trading model. The platform must ensure strict separation of customer assets and company assets, and implement cold wallet/multi-signature custody mechanisms.

SC introduces the Digital Asset Custodian ( DAC) system, setting up specific regulatory thresholds. Currently, 3 institutions have obtained DAC principle approval. Most platforms entrust third-party international custodians to hold Crypto Assets.

SC requires exchanges:

• Maintain a 1:1 reserve ratio
• Regular asset audits and reserve proof disclosures
• Prohibiting the use of client assets for lending or investment

V. Market Status and Platform Competitive Landscape

The Malaysian crypto market has shown steady growth in recent years. In 2021, the trading volume was approximately 21 billion ringgit, and in 2022, 128,000 new accounts were added.

Luno Malaysia has an absolute leading market share, with over 1 million users and an annual trading volume of 87 billion ringgit, accounting for more than 90% of the market. Other platforms like Tokenize and MX Global are developing in a differentiated manner to target specific groups.

Investors are primarily retail, with a notable youth demographic. The average age is 34.8 years, with males accounting for 76%, and the median deposit amount is RM100. Investors under 45 years old account for over 72%.

The market trading activity is closely related to international trends. In 2023, the rebound of Bitcoin led to a significant increase in trading volume, and in 2024, breaking through 100,000 USD further heightened the enthusiasm.

6. The Use of Unauthorized Platforms and Regulatory Attitudes

Some investors still use unregistered overseas platforms such as Binance, Huobi, Bybit, etc., to gain access to more trading varieties. Regulation is taking gradually escalating restrictive measures:

1. Investor Warning List System
2. Formal Law Enforcement and Prohibition Orders
3. Technical and financial means blockade
4. Investor Education and Public Advisories

These actions have achieved phased results, with multiple international exchanges announcing their withdrawal from the Malaysian market, leading to a significant decline in local traffic. Regulatory authorities adopt a zero-tolerance stance towards unlicensed platforms and establish a regulatory bottom line of "compliance as the foundation, with risks borne by oneself."

7. Token Issuance System and IEO Platform Supervision

Malaysia adopts a highly cautious compliance system for token issuance, introducing the IEO platform model to replace the traditional ICO. All public fundraising token issuances are regarded as securities issuance and are included in the regulatory framework.

The issuer of the token must meet conditions such as registration location, minimum capital, and corporate governance. IEO platforms are included in the "recognized market operators" system and must undergo full-process due diligence and subsequent supervision.

The compliance issuance process includes: application and white paper disclosure, platform due diligence and review, SC filing confirmation, public offering, fundraising and delivery, subsequent reports and regulatory disclosure.

By 2025, two platforms will have obtained IEO licenses: Pitch Platforms and Kapital DX. Representative cases include:

• Integra Healthcare Fixed Income Token: The first compliant security token
• BidNow platform token: the first IEO token to achieve circulation on a local exchange
• Ri Xin Industrial Ni Hsin Group: The listed company participates in IEO

The IEO market is still in its early stages, with a limited number of projects but a high degree of compliance. Most are small and medium financing projects under 10 million Ringgit, providing local enterprises with innovative financing channels.

8. Types of Issuable Tokens and Their Legal Status

SC divides tokens into three categories and sets corresponding legal boundaries:

1. Functional tokens: Even if used solely as "digital certificates", if they involve fundraising, they must be subject to regulation.
2. Security Tokens: Equivalent to traditional securities, subject to the full set of regulatory requirements.
3. Asset tokenization tokens: Even if the underlying assets are legal, tokenization still needs to fulfill securities regulatory obligations.

SC emphasizes that in the future, traditional capital market products will be issued through DLT tokenization, and their legal attributes will still be treated as traditional securities.

9. Token Trading and Listing Mechanism

Tokens issued through an IEO must be listed on a licensed DAX for public circulation. The listing process includes:

• Regulatory filing and approval
• Internal Review of the Exchange
• Listing and Announcement Mechanism

There is no significant difference in the circulation mechanism of functional tokens and security tokens after being listed on DAX; both are priced based on market supply and demand.

The SC establishes a continuous regulatory system for the secondary market, including:

• Anti-money laundering and real-name system requirements
• Market Manipulation Monitoring Mechanism
• Continuous Disclosure Obligation

If irregularities are found, SC may order DAX to suspend trading, delist, or revoke listing qualifications.

10. Summary and Outlook

Malaysia's digital asset regulatory system has formed a relatively complete compliance framework, covering the entire process of supervision. The IEO system achieves a closed loop from policy design to actual operation, but public participation is still in the "rational observation and small-scale participation" stage.

The SC holds a "cautiously open" attitude towards IEOs and is evaluating the expansion of the tokenization mechanism to traditional capital market products. In the future, the number of IEO platforms and types of projects is expected to grow, and whether more stablecoins and RWA-type assets will be open for listing depends on policy assessments and market feedback.

Against the backdrop of tightening global regulations, Malaysia may attract more enterprises to adopt compliant paths through institutional stability and legal clarity, promoting itself to become one of the digital financial centers in Southeast Asia.