With TOKEN2049 in Singapore concluding on such a remarkable high note, coinciding with the Singapore Formula One Grand Prix and Bitcoin surging to an all-time high of USD126,000 at the time of writing, it truly could not have been a more exhilarating way to end or begin the week, depending on when you are reading this.
Two of the key themes that dominated conversations throughout TOKEN2049 were, without question, (i) the accelerating institutional wave of tokenization reshaping the global capital markets, and (ii) the evolving use cases of stablecoins, Central Bank Digital Currencies (CBDCs), and cryptocurrencies as instruments of payment.
Reflecting on Malaysia’s Fintech and Digital Asset Landscape
As we step into the final quarter of 2025, there could not be a more timely moment to reflect on Malaysia’s own fintech and digital asset regulatory landscape, particularly where we currently stand in the context of stablecoins, CBDCs, and crypto as a means of payment. Hence, in this article, we aim to take a closer look at the present regulatory posture and market developments in Malaysia, and explore where the next chapter of Malaysia’s digital asset evolution may lead.
Looking back at the beginning of 2025, there is little doubt that Malaysia’s fintech and digital asset landscape has undergone a truly transformational shift, pretty much one that moves almost in lockstep with global developments.
The year began with the Securities Commission Malaysia (SC) launching its long-awaited Regulatory Sandbox, a key milestone enabling controlled experimentation of innovative financial solutions within a safe regulatory environment. This was then followed by the release of the Public Consultation Paper on the “Proposed Regulatory Framework for Offering and Dealing in Tokenised Capital Market Products”, in which the SC introduced the concept of Digital Twin Representation Tokens, a framework designed to facilitate the tokenization of capital market products. Then, in June, Bank Negara Malaysia (BNM) further advanced this narrative with the launch of the Digital Asset Innovation Hub, signalling a clear commitment to fostering innovation within a regulated framework.
Taken together, from the SC’s Regulatory Sandbox, to its tokenization consultation paper, and now BNM’s Digital Asset Innovation Hub, these initiatives collectively send one of the clearest signals yet to industry and institutional players that Malaysia’s regulators are not only observing the global movement toward tokenization – they are, in fact, actively charting the course and laying the foundational groundwork to mirror and complement the global wave of tokenization sweeping across capital markets.
As discussed extensively at TOKEN2049, if one could look into a crystal ball, the clearest indicator of what lies ahead in the global financial ecosystem would be the tokenization of capital market products. For the first time, financial institutions around the world are preparing for this paradigm shift, and Malaysia, in its own way, is getting ready too.
The Inextricable Link Between Tokenization and Building the Liquidity Infrastructure for Tokenised Finance
However, those who are familiar with, and more importantly, truly understand, the mechanics of institutional tokenization of capital market products would immediately recognise that one cannot meaningfully discuss tokenization without also addressing CBDCs, stablecoins, digital assets and cryptocurrencies as instruments of payment, as they form the liquidity layer that underpins and facilitates transactions on the blockchain. Their function is not only timely but increasingly indispensable to the operational and financial architecture of the tokenized economy.
Recognising the importance of an underlying liquidity layer to the concept of tokenization is absolutely crucial, as it is what makes transactions on the blockchain possible. To put it more plainly, this underlying liquidity layer functions as the medium of payment or, in essence, a digital legal tender for the buying and selling of tokenised capital market products and other real-world assets on the blockchain. For this exact reason, regulators around the world are now faced with addressing the biggest missing piece of the puzzle, which is identifying the most appropriate and regulated digital asset that can be used to facilitate such transactions on-chain because without regulatory clarity on this, the broader ecosystem of tokenisation cannot mature in a meaningful or sustainable way.
We are already seeing clear regulatory leadership emerging in this space. In the United States, the GENIUS Act 2025 was passed into law in July 2025, establishing a comprehensive regulatory framework for payment stablecoins, setting governance, reserve, and operational requirements for issuers. Similarly, in Hong Kong, the Stablecoin Ordinance officially came into effect in August 2025, introducing a licensing regime for fiat-referenced stablecoin issuers, requiring them to obtain approval from the Hong Kong Monetary Authority. Ultimately, this global momentum reflects a simple narrative that one cannot meaningfully advance the regulatory landscape around the tokenisation of real-world assets or capital market products without first regulating the very medium that facilitates those transactions. To push one without the other would be to build a financial bridge without first securing its foundation.
Turning our attention closer to home, Malaysia’s tokenisation journey is still at a formative stage. The SC’s public consultation paper on tokenised capital market products and the Regulatory Sandbox initiatives are paving the way for experimentation and structured fintech development. However, when it comes to the use of digital assets, cryptocurrencies, stablecoins, or CBDCs for payments, the landscape remains largely ambiguous, with no specific legal or regulatory certainty governing their use at present.
Of course, as with many other jurisdictions, USDT and USDC continue to dominate as the preferred stablecoins among Malaysian users. However, these stablecoins are not exactly listed or supported by local Digital Asset Exchange operators. As a result, individuals or institutions seeking to purchase USDT or USDC often resort to unregulated peer-to-peer transactions on unregulated platforms, or purchase them via DeFi channels, unless they have the means to acquire them in large volumes through over-the-counter arrangements. With that being said, several Malaysian companies are also actively developing or preparing to launch MYR-pegged stablecoins, each adopting different mechanisms, some through a 1:1 fiat-backed model, others via tokenised deposit concepts, and a few exploring asset-back structure. In parallel, there are also growing discussions around the potential issuance of a CBDC, which would allow BNM to exercise greater oversight, control, and transparency over the movement of digital funds within the national economy.
From our active involvement in various digital asset projects and ongoing dialogues with regulators, without disclosing anything confidential, what we are witnessing is, in many ways, a tug of war within Malaysia’s regulatory landscape. But it is not a tug of war against one another, rather, it is a collective tug where regulators and industry players alike are pulling together against the constraints of existing legal frameworks, seeking to strike a delicate balance between innovation and compliance within the ambit of the law.
When it comes to payments, whether through CBDCs, stablecoins, or any other form of digital asset or cryptocurrency, the discussion ultimately returns to the Financial Services Act 2013 (FSA). Under the FSA, besides Malaysia’s official fiat currency, the Malaysian Ringgit, all other means of payment that we commonly use daily, such as credit cards, debit cards, and electronic money, are categorised as “designated payment instruments”.
Section 2 of the FSA defines a “payment instrument” as:
“any instrument, whether tangible or intangible, that enables a person to obtain money, goods or services or to make any payment.”
Crucially, the FSA also empowers Bank Negara Malaysia to designate an instrument as a designated payment instrument if it is of the opinion that—
“(a) a payment instrument may be of widespread use as a means of making payment and may affect the payment systems in Malaysia; and
(b) it is necessary to maintain the integrity, efficiency and reliability of the payment instrument,
the Bank may, with the concurrence of the Minister, by an order published in the Gazette, designate such payment instrument as a designated payment instrument.”
At present, Malaysia’s prescribed designated payment instruments are limited to (i) charge cards, (ii) credit cards; (iii) debit cards; and (iv) electronic money. In other words, should stablecoins, CBDCs, or any other form of digital asset or cryptocurrency be intended for widespread payment use in Malaysia, they would almost certainly need to be aligned with the Financial Services Act 2013 and be formally designated as a payment instrument.
As the number of sandbox projects grows and interest in tokenising real-world assets and capital market products intensifies, one consistent theme has emerged across the industry that for any such tokenised project to function effectively, there must be clarity on the underlying digital asset or token that will serve as the liquidity layer or medium of payment.
Of course, there is no simple or inexpensive solution to this. Even if, from an end-user’s perspective, transactions appear to occur in MYR, the underlying infrastructure must still create a liquidity pool to convert MYR into an on-chain equivalent that enables the purchase, transfer, or redemption of the tokenised real-world asset or capital market product. This then raises further layers of complexity, from the choice of blockchain architecture, whether private or public, to the bridging mechanisms that connect off-chain and on-chain systems, to ownership of validator nodes, and the reconciliation of transaction records between both environments. Above all, perhaps most importantly, what treasury mechanisms should be in place to guarantee stability, transparency, and trust within the liquidity pool.
Possible Futures: CBDCs, Licensed Stablecoins, or Open Digital Assets?
Of course, we do not, and cannot, predict with certainty which direction Malaysia’s regulatory landscape will ultimately take. The path forward could vary that Malaysia may choose to pursue a CBDC framework, with BNM assuming the role of issuer; or it may adopt a model similar to the United States or Hong Kong, by recognising and licensing stablecoin issuers under a defined regulatory regime. There is also the possibility of a broader, more liberal approach, where certain categories of digital assets may be permitted as legitimate means of payment within a controlled environment.
Each of these routes, of course, comes with its own regulatory, operational, and prudential considerations, from monetary policy implications and consumer protection, to systemic risk and financial stability. Yet, one thing we can be fairly certain of is that regulatory clarity is coming soon, and it is only a matter of time before the framework for digital asset payments takes a more definitive shape.
In light of this, the best time to prepare is now, starting with board-level education and awareness. Understanding the evolving digital asset landscape, the potential policy directions, and the practical implications for businesses will be critical. As Malaysia continues to build the foundation for its next phase of financial innovation, those who are informed, adaptive, and forward-looking will be best positioned to lead in the new era of digital finance.
If your organisation requires further insights or legal guidance on digital assets or any fintech-related matters, please feel free to reach out to the firm’s Technology Practice Group. Our lawyers have extensive experience in assisting clients with their legal needs, particularly in navigating compliance and licensing requirements within the fintech market.
Our Technology Practice continues to be recognised by leading legal directories and industry benchmarks. Recent accolades include FinTech Law Firm of the Year at the ALB Malaysia Law Awards (2024 and 2025), Law Firm of the Year for Technology, Media and Telecommunications by the In-House Community, FinTech Law Firm of the Year by the Asia Business Law Journal, a Band 2 ranking for FinTech by Chambers and Partners, and a Tier 3 ranking by Legal 500.
About the authors
Ong Johnson
Partner
Head of Technology Practice Group
Fintech, Data Protection,
Technology, Media & Telecommunications (“TMT”),
IP and Competition Law
johnson.ong@hhq.com.my
◦
Lo Khai Yi
Partner
Co-Head of Technology Practice Group
Technology, Media & Telecommunications (“TMT”), Technology
Acquisition and Outsourcing, Telecommunication Licensing and
Acquisition, Cybersecurity
ky.lo@hhq.com.my.
More of our Tech articles that you should read:
