The digital assets and blockchain scene in 2024 has been notably positive, with more ups than downs and numerous headline-grabbing developments. Many of these were highlighted in our previous articles and podcast recordings on HHQ Legal Insight. As we look ahead to the outlook for Malaysia’s digital assets, blockchain, and cryptocurrency landscape in 2025 and beyond, it is worthwhile to revisit some of the key global developments from 2024 that will undoubtedly shape what lies ahead for Malaysia.
One of the most significant and potentially historic milestones in 2024 was the launch of Spot Bitcoin ETFs in the United States by the Securities and Exchange Commission in January 2024. This approval marked a pivotal point for the digital assets industry, as since its launch, Spot Bitcoin ETFs have experienced remarkable success, with billions of dollars in inflows. To put this into context, the inflows for Spot Bitcoin ETFs have significantly outpaced those of other asset class ETFs in their very first year. The Spot Bitcoin ETFs have quickly become one of the most successful and popular investment vehicles of 2024, and their approval and strong performance sent a clear global signal, reinforcing the growing acceptance of digital assets as institutional investments with increasing regulatory recognition and support.
Another pivotal event in 2024 was Bitcoin’s halving, which took place in April 2024. For context, Bitcoin has a capped maximum supply of 21 million coins, and its protocol ensures that no more Bitcoins can be produced once this limit is reached. Bitcoin halving is a scheduled event that reduces the mining reward for validating a Bitcoin block by 50%, occurring approximately every four years. Historically, miners received 50 BTC per block at Bitcoin’s inception. Following successive halving events, this reward decreased to 25 BTC in 2012, 12.5 BTC in 2016, 6.25 BTC in 2020, and most recently, 3.125 BTC after the April 2024 halving. Each halving is significant for Bitcoin’s ecosystem, as it reduces the rate at which new Bitcoins enter circulation, increasing the asset’s scarcity. This scarcity effect was compounded by the concurrent introduction of Spot Bitcoin ETFs, which spurred consistent institutional purchases of Bitcoin. Notably, halving events are also recognized as the start of new four-year market cycles – historically, these cycles have seen Bitcoin’s price reach new all-time highs following halving events. True to this pattern and supported by increased demand driven by Spot Bitcoin ETFs, Bitcoin achieved a new all-time high of over $108,000 in December 2024, marking the onset of a new bull market in digital assets.
Adding to this global momentum, the recent election of Donald Trump to a second term as President of the United States has sparked speculation about the potential creation of a Strategic Bitcoin Reserve by the U.S. government, akin to national gold reserves. If implemented, such a move would further validate Bitcoin and digital assets as legitimate investments, driving up demand as the U.S. acquires significant amounts of Bitcoin.
Globally, 2024 has marked significant advancements in the digital assets, blockchain, and cryptocurrency sectors. Closer to home, Malaysia stands on the cusp of transformative change, offering an opportunity to assess what lies ahead in 2025 and beyond. Drawing from our ongoing observations and engagements with market leaders and regulators, we anticipate 5 key developments that will shape Malaysia’s digital assets and blockchain landscape. Greater clarity in regulatory frameworks is expected to emerge, enabling the following transformations:
1. The Emergence of Stablecoins in Malaysia
The adoption of stablecoins, particularly those denominated in Ringgit Malaysia, is expected to gain momentum with further regulatory clarity, as stablecoins play a pivotal role in the digital asset ecosystem as blockchain-based digital currencies. Unlike fiat currencies or electronic monies, they fulfill unique functions that traditional monetary systems cannot fully replace.
Recent discussions and proposals regarding the launch of stablecoins in Malaysia highlight the growing demand for such assets, however, a comprehensive regulatory framework governing stablecoins has yet to be established. Stablecoins come in various forms—algorithmic, crypto-backed, commodity-backed, and fully fiat-backed—each with distinct operational mechanisms. With the increasing push for real-world asset (RWA) tokenization, the demand for regulatory clarity in this space is undeniable, and we trust that it is only a matter of time before clearer frameworks are introduced.
2. Legal Recognition of Cryptocurrencies and Digital Assets as Payment Instruments
The potential legal recognition of cryptocurrencies and digital assets for payment purposes is another critical regulatory area to monitor. Beyond fiat currencies and electronic monies, there is a growing call for greater flexibility in recognizing cryptocurrencies and digital assets as legitimate payment instruments, as many companies are now considering launching tokens intended for use as payment tools within business ecosystems. However, unlike stablecoins, which are designed to maintain value stability, these tokens often fluctuate in value based on supply and demand. Therefore, as usage of these assets increases, it is without doubt that regulatory frameworks will need to be updated to properly address their functionality as payment instruments alongside fiat currencies and electronic monies.
3. Regulations for Real-World Asset Tokenization
The Tokenization of RWA presents a significant opportunity for Malaysia, as virtually any tangible or intangible asset, such as intellectual property, real property, land, wine, watches, treasuries, or bonds, can be tokenized. This RWA tokenization mechanism holds immense potential, however, it also raises critical questions regarding the legal rights attached to tokenized assets and the frameworks required to protect the interests of token holders.
Clear regulatory guidance will be essential, particularly on matters such as whether these tokens can generate yields or returns and how legal rights, such as land rights, can be incorporated into RWA tokens. As Malaysia advances toward embracing RWA tokenization, we anticipate the introduction of more comprehensive regulatory guidelines to address these complexities and support sustainable growth in this space.
4. Regulatory Clarity for Decentralized Finance
Decentralized Finance (DeFi) represents a rapidly expanding market with significant potential to complement traditional financial systems. DeFi encompasses a wide range of applications, including lending platforms, peer-to-peer mechanisms, swapping services, and insurance solutions. As blockchain technology continues to advance, the growth of DeFi applications accelerates correspondingly.
While DeFi innovation holds the potential to drive substantial advancements in financial services, certain segments such as insurance DeFi, lending DeFi, and peer-to-peer DeFi, which are among the most prevalent in the DeFi market face significant regulatory challenges. These activities often fall under regulated frameworks and typically require licenses to operate, however, due to the decentralized nature of DeFi, even companies willing to undergo the regulatory process to obtain licenses may not meet traditional requirements as DeFi operates fundamentally differently, relying on smart contracts and eliminating the need for intermediaries and trustees, which are integral components of conventional regulatory models. As a result, we foresee greater regulatory clarity in the area of DeFi to provide structure and security while fostering continued growth and innovation.
5. Increased Institutional Adoption of Blockchain Technology
Finally, we anticipate greater institutional adoption of blockchain technology in Malaysia. Following global trends, local companies are increasingly exploring how blockchain can unlock value and new monetization opportunities. This development is expected to drive demand for blockchain expertise, which remains scarce. Companies are positioning themselves to address this talent gap, emphasizing the importance of nurturing expertise in this domain.
Conclusion
Based on our close conversations with key stakeholders and matters actively handled by the Technology Practice Group, it is evident that there is growing demand for clearer regulatory frameworks in Malaysia’s digital assets and blockchain landscape. While regulatory development often lags behind innovation, particularly in a fast-evolving space like blockchain, we are pretty confident that 2025 and beyond will bring significant regulatory progress in the industry.
If your organization seeks to better understand stablecoins, payment instruments, RWA tokenization, decentralized finance, or blockchain technology adoption, the Technology Practice Group is highly experienced in these fields and their corresponding legal developments. Please feel free to reach out to us, and we would be delighted to assist.
About the authors
Ong Johnson
Partner
Head of Technology Practice Group
Technology, Media & Telecommunications (“TMT”),
Fintech, TMT Disputes, TMT Competition, Regulatory
and Compliance
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.
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