With the very recent announcement from the Digital Asset Innovation Hub (“DAIH”), established under Bank Negara Malaysia (“BNM”), formally admitting three financial institutions, namely Malayan Banking Berhad, CIMB Group Holdings Berhad and Standard Chartered Bank Malaysia Berhad, into its initiatives, or what many have colloquially termed the “DAIH Sandbox”, the market has, quite understandably, taken notice. Malayan Banking Berhad and CIMB Group Holdings Berhad are exploring tokenised deposits for payments, whilst Standard Chartered Bank Malaysia Berhad is exploring Ringgit-denominated stablecoins for B2B settlement.
Without doubt, this crucial development has become a catalyst and an eye-catching headline, drawing the attention of many other financial institutions. For those observing closely, we know that this is more than mere market noise. It is, in many respects, a clear signal that the conversation around tokenised money in Malaysia is no longer theoretical, instead, it is now progressively moving toward structured experimentation within the regulatory perimeter.
Against this backdrop, this article is specifically designed for other financial institutions seeking to make sense of the broader ecosystem of tokenised money, stablecoins, tokenised deposits, and the surrounding value chain. The objective is not simply to describe what is unfolding, but to assist financial institutions in positioning themselves thoughtfully by understanding both the underlying opportunities and the attendant risks that should be weighed with care. We hope that this article will provide a clear, high-level overview of what is currently taking place and offer a structured way to interpret and navigate these crucial fintech developments.
Setting the Context: Understanding Tokenised Money
To set the context, particularly for those who may be less familiar with the evolution of this fintech space, the modern regulatory framing of tokenised money in Malaysia can be traced to the Discussion Paper titled Asset Tokenisation in the Malaysian Financial Sector (“Asset Tokenisation Paper”), released by BNM in October 2025. The paper was widely regarded by many professionals as more than a long-awaited publication within the fintech community, but more importantly, it sets the tone and the regulatory roadmap for what lies ahead in relation to asset tokenisation within Malaysia. It also outlined priorities, key concerns, risk factors, and, perhaps most significantly, the focal points that financial institutions should begin paying serious attention to.
At a high level, the concept of tokenisation, in simple layman’s terms, refers to the process of representing an asset on a blockchain in the form of a digital asset. Applying the same logic, tokenised money simply refers to money that is represented in token form on a blockchain.
The Asset Tokenisation Paper identifies three primary forms of tokenised money:
1. Central Bank Digital Currencies (“CBDCs”);
2. Stablecoins; and
3. Tokenised Deposits.
Essentially, a CBDC refers to the digital representation of central bank money issued and backed directly by a central bank. In Malaysia’s context, this would mean issuance by BNM. Structurally, a CBDC represents sovereign-backed digital cash designed to function as a risk-free settlement asset within a tokenised monetary system.
A stablecoin, on the other hand, may be understood as a type of token minted on a blockchain that is designed to maintain a stable or fixed value. Most stablecoins are pegged to the value of a specific country’s currency. Therefore, a MYR-denominated stablecoin would be pegged to the Malaysian Ringgit. Conceptually, one may think of it as a digital twin of fiat currency, engineered to exist and operate entirely within the blockchain ecosystem.
Tokenised deposits, by contrast, involve financial institutions tokenising their clients’ deposits, which means representing existing customer deposits in digital token form on a distributed ledger. A tokenised deposit remains commercial bank money and is backed by the underlying fiat currency deposited with the issuing bank, but it is represented and capable of operating within programmable platforms. In essence, it is a digital representation of existing bank deposits (M1) held by depository institutions on programmable platforms, adapted for a blockchain environment.
Strategic Positioning Within the Tokenised Money Ecosystem
Having understood the fundamental concept of tokenised money, the natural progression is to consider how financial institutions might position themselves going forward.
Most intuitively, the immediate value proposition appears similar to that pursued by Malayan Banking Berhad, CIMB Group Holdings Berhad and Standard Chartered Bank Malaysia Berhad, namely, to explore and potentially issue either a stablecoin or a tokenised deposit. That, without question, is the most natural starting point.
However, from our conversations with numerous financial institutions, the hesitation is rarely rooted in unwillingness. It is often a combination of technical and legal complexity in fully grasping what stablecoins or tokenised deposits entail, which is entirely understandable. Blockchain, despite having existed for some time, is only relatively recently being properly commercialised and institutionalised. While many may have heard of blockchain or tokenisation, but few have interacted with it in any meaningful way, and far fewer still have developed a thorough understanding of its operational and regulatory implications.
Also, it is seldom a question of pure capability because, based on our experience, financial institutions are more than able and willing to equip themselves with the requisite expertise by engaging the appropriate fintech lawyers or technical consultants. The more persistent challenge, in our experience, actually lies in the difficulty in seeing the entire ecosystem and economic value chain surrounding stablecoins or tokenised deposits. Once a financial institution understands what a stablecoin or tokenised deposit is, and becomes comfortable with the legality and technical mechanics of issuance, the inevitable question follows: what comes next?
Issuance is, of course, the catalyst, but not the entire economic story.
If a stablecoin or tokenised deposit operates on a permissioned blockchain, the operational and commercial exposure naturally extends far beyond the token layer alone, but across the full payment value chain. It is precisely at this point that, by understanding how the economic function performs at each layer of the tokenised ecosystem, financial institutions can then begin to determine how best to position themselves for what is to come.
At the foundational level, if a financial institution issues a stablecoin or tokenised deposit, it assumes the role of issuer by minting, burning, issuing and redeeming tokens, while holding the backing reserves to ensure that the stablecoin or tokenised deposit remains properly pegged. Yet, we need to appreciate that the value chain of tokenised money is certainly broader than the act of issuance.
Irrespective of use case, stablecoins and tokenised deposits will ultimately be used for settlement, payments or remittances, and it is here that the broader payment value chain begins to unfold, layer by layer, depending on how a financial institution chooses to position itself.
i) The Permissioned Blockchain as Payment Infrastructure
The next natural layer concerns the permissioned blockchain on which the stablecoin or tokenised deposit operates. In a permissioned chain, governance exists over validator admission, consensus mechanisms, transaction ordering and settlement finality. Depending on how the permissioned blockchain is structured and developed, if financial institutions, whether individually or through a consortium, control and operate validator nodes, and determine how transactions are validated and finalised, the arrangement on the permissioned blockchain somehow begins to resemble the operation of a payment system under the Financial Services Act 2013.
In order to transfer or settle stablecoins or tokenised deposits, traditional payment systems used to process fiat funds are simply not suitable because stablecoins or tokenised deposits can typically only be transferred natively on the permissioned blockchain on which they are minted. It then becomes a question of which specific permissioned blockchain the stablecoin or tokenised deposit is minted on.
Therefore, one can easily envisage a scenario where a particular permissioned chain achieves greater market adoption by connecting financial institutions, merchants and a large user base, with clearing and settlement occurring within that governed environment. From a purely commercial perspective, the ability to earn transaction or “gas” fees, and to operate such settlement infrastructure functionally analogous to a payment system, presents a significant strategic positioning opportunity for financial institutions.
From a commercial perspective, this is not dissimilar to how established payment system operators function in traditional finance. Entities such as PayNet, Visa, Mastercard and American Express derive value from operating and governing payment rails rather than from issuing money itself. Operating or co-governing such a settlement network or infrastructure, which is the permissioned blockchain, may therefore represent a significant strategic positioning opportunity for financial institutions, potentially more substantial than issuance alone.
ii) The Merchant Acceptance Layer
Beyond issuance and network infrastructure, it is almost inevitable that stablecoins and tokenised deposits will ultimately be used for payment and settlement. It is at this juncture that the merchant acceptance layer becomes commercially significant for financial institutions as well.
If a client transfers stablecoins or tokenised deposits from their wallet to a merchant’s wallet, commercial reality would often dictate that merchants would prefer settlement in Ringgit Malaysia rather than holding stablecoins or tokenised deposits on their balance sheet. Therefore, where an intermediary onboards merchants, processes stablecoin or tokenised deposit payments, and then converts them into fiat currency and credits the merchant’s bank account, that intermediary is, in substance, somehow performing a function closely analogous to that of a merchant acquirer. Because effectively, it is processing and settling payment transactions on behalf of merchants.
Therefore, depending on how the merchant acceptance layer is structured, such functions could potentially fall within, or at least closely resemble, the role of a merchant acquirer under existing regulatory frameworks. This then immediately opens yet another strategic layer within which financial institutions may choose to position themselves, not merely as issuers or infrastructure operators, but as facilitators of merchant acceptance within a tokenised payment ecosystem.
Many financial institutions are already registered merchant acquirers within the existing regulatory perimeter. They possess the operational infrastructure, merchant networks, compliance frameworks and risk management capabilities necessary to process and settle payment transactions on behalf of merchants. Therefore, against that backdrop, extending these capabilities into the stablecoin or tokenised deposit environment presents, at least conceptually, a relatively straightforward value proposition, as rather than building an entirely new business vertical, financial institutions may leverage their existing merchant acquiring experience and knowledge, onboarding processes, settlement rails and merchant relationships to facilitate acceptance of tokenised payments.
iii) Cross-Border Remittance
Beyond payment and domestic settlement, one of the most compelling use cases for stablecoins and tokenised deposits is, without doubt, remittance for cross-border transfers. One of blockchain’s most frequently cited value propositions is efficiency, with the ability to settle transactions with near immediacy. In practical terms, this makes T+0 cross-border transfers a realistic proposition, transforming what has traditionally been a multi-day process into one that can occur almost instantaneously.
The market opportunity here is significant, and the demand profile is already well established with the use case of USDT and USDC. Hence, for financial institutions that may prefer not to enter the issuer, payment infrastructure or merchant acquisition segments, remittance presents a commercially attractive and conceptually straightforward entry point especially where the usability of blockchain for cross-border value transfer is no longer theoretical, but it is already well tested and increasingly refined in many other jurisdictions.
However, stablecoin and tokenized deposit remittance may also prove to be the most complex from a regulatory standpoint, because cross-border transfers inevitably engage the laws and regulatory expectations of multiple jurisdictions. They attract heightened scrutiny from an AML/CFT perspective and may also raise capital flow monitoring considerations. Therefore, any financial institution positioning itself within this remittance layer must therefore approach it with a carefully calibrated compliance architecture.
iv) Digital Asset Custody
Beyond issuance, payment infrastructure, merchant acquisition and remittance, an even broader economic layer that financial institutions may explore is digital asset custody. Once stablecoins or tokenised deposits are minted and circulating, the need for secure custody arrangements becomes natural and extremely essential. In many respects, digital asset custodians perform a role analogous to traditional trustees by safeguarding assets on behalf of clients within a structured and regulated environment.
Within the current ecosystem, not only in relation to stablecoins and tokenised money, but increasingly in the context of tokenised capital market products, the role of the digital asset custodian is gaining considerable prominence within Malaysia. As tokenisation expands across asset classes, custodians are slowly emerging as critical supporting financial institutions within the broader architecture, much like trustees have long underpinned traditional finance.
Viewing the Tokenised Money Ecosystem Holistically
When viewed comprehensively, the tokenised money landscape extends far beyond issuance. It actually spans infrastructure governance, merchant acceptance, cross-border remittance, and institutional custody. Each layer performs a distinct economic function, and each layer carries its own value considerations and risk-return profile. We truly believe that financial institutions that approach tokenised money as a multi-layered ecosystem, rather than a single product innovation, will be better equipped to identify where sustainable competitive advantage may lie.
Therefore, in light of the developments discussed above, financial institutions that are considering participation in the evolving tokenised money landscape could give serious thought to engaging with the DAIH Sandbox. DAIH has indicated that, at this juncture, priority use cases include tokenised deposits, Ringgit-backed stablecoins, programmable payments and supply chain financing. These areas align closely with the broader themes articulated in BNM’s Asset Tokenisation Paper and reflect where regulatory focus and market experimentation are presently converging within Malaysia.
However, it is also important to emphasise that admission into the DAIH Sandbox does not in itself constitute, nor guarantee, regulatory recognition upon completion of the testing period. BNM makes it clear that any intention to deploy a solution in a live production environment will still remain subject to further assessment, including consideration of potential legal or regulatory impediments.
Conclusion
Therefore, with an appreciation of how quickly the market is evolving, the DAIH Sandbox currently presents one of the most constructive avenues available, as participating in the DAIH Sandbox allows financial institutions to test and learn directly alongside BNM and other ecosystem participants. It provides early insight into supervisory expectations, risk management standards and practical implementation challenges. It also creates opportunities to identify and develop partnerships across the tokenised value chain, whether in infrastructure, custody, merchant acceptance or cross-border use cases.
Perhaps most importantly, it enables financial institutions to deepen their understanding of viable business models before full-scale commercialisation becomes widespread. In a market that is moving quickly, we trust that early structured engagement can be more valuable than late reactive entry and to only play catch up once the market has already moved.
The Technology Practice Group of Halim Hong & Quek 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.
If you have any questions on the fintech, digital asset or tokenization, please feel free to reach out to the partners at the Technology Practice Group, Ong Johnson and Lo Khai Yi, for consultation.
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:
