Malaysia: A FinTech Legal Overview

Tokenised Money is Coming to Malaysia

The concept of asset tokenisation is certainly getting closer than one thinks in Malaysia. As this development continues to evolve, one key aspect that simply cannot be overlooked is the use of different forms of tokenised money for settlement, remittance and payment purposes. The representation and transfer of tokenised assets are deeply intertwined with how value moves across the financial system. In that context, tokenised money is likely to play a central role at this intersection, by bridging the gap between the traditional financial system and the emerging digital asset economy.

Therefore, this article will explore the three principal forms of tokenised money currently gaining traction globally – (i) central bank digital currencies (CBDCs), (ii) tokenised deposits and (iii) stablecoins – and examines their legal and regulatory landscape in Malaysia, associated risks and challenges, as well as global trends shaping their development. Finally, we will consider what may realistically be on the horizon for Malaysia as regulators and financial institutions navigate this next phase of digital finance.

From Digital Assets to Tokenised Money: A Structured Overview

The use of tokenised money for settlement, remittance or even payment purposes has certainly come a long way, especially when one considers how the fintech, cryptocurrency and broader digital asset markets first began. From the early days of Bitcoin to today’s wave of global regulation and institutional adoption, the evolution has been truly remarkable.

However, to appreciate where tokenised money fits within this evolution, it is helpful to understand how Malaysia’s digital asset landscape is structured today. For clarity and ease of reference, digital assets in Malaysia may broadly be categorised into three key groups:

• digital assets;
• digital twin representation tokens; and
• tokenised money.

Digital assets

To build a foundational understanding, digital assets are the earliest and most familiar form to Malaysians. These include cryptocurrencies and other digital assets that are listed and traded on Digital Asset Exchange (DAX) platforms regulated by the Securities Commission Malaysia (SC), such as BTC, ETH, ADA, DOGE, DOT, LINK, NEAR and SOL.

Like it or not, while DAXs and these digital assets are regulated by the SC, they have not attracted much institutional attention, and it is largely because trading remains dominated by retail participants, with limited involvement from larger financial institutions.

Digital twin representation tokens

The second category is digital twin representation tokens, which refers to tokenised capital market products. This concept was introduced for the first time by the SC in its Public Consultation Paper No 1/2025 on the Proposed Regulatory Framework for Offering and Dealing in Tokenised Capital Market Products.

Essentially, a tokenised capital market product involves the tokenisation of existing capital market instruments, such as securities, derivatives, private retirement schemes, unit trust schemes and other similar products, by creating a digital version that is recorded and managed on a distributed ledger.

While the framework remains under public consultation, its introduction marks a significant regulatory milestone, as it clearly signals a shift in direction by moving blockchain and tokenisation beyond retail cryptocurrency trading towards greater institutional and regulated use cases.

Tokenised money

Finally, the third category, and the main focus of this article: tokenised money. When it comes to tokenised money, it is important to recognise that, as of December 2025, the concept has yet to be officially introduced or implemented in Malaysia. However, based on global trends and regulatory developments, it is anticipated that if tokenised money is taking form, it is likely emerging in one or more of the following three forms:

• CBDCs;
• tokenised deposits; and
• stablecoins.

Central bank digital currencies (CBDCs)

Essentially, a CBDC refers to the digital representation of central bank money that is issued and backed directly by a central bank. In Malaysia’s case, this would be Bank Negara Malaysia (BNM). It is considered that there are strong use cases and incentives for BNM to eventually issue its own CBDC in Malaysia because, from a monetary policy perspective, a CBDC enables BNM to maintain effective control over the money supply and policy transmission, while at the same time modernising the national payment system and enhancing efficiency across the entire payment flow.

Above all, the most compelling narrative for the government to advocate for a CBDC lies in its potential to provide far greater transparency and oversight over money flows within the economy, hence offering a relatively immediate solution to long-standing challenges related to tax evasion and corruption. Given that CBDC transactions are recorded on a ledger likely maintained by BNM itself, all transactions carried out on the ledger would attain unprecedented transparency and oversight. In other words, this visibility makes it significantly harder, if not almost impossible, for individuals or entities to conceal unreported income or engage in off-the-books transactions, so long as the transaction is conducted through CBDCs. This would, in turn, greatly reduce tax evasion and enhance compliance.

Similarly, given its full transparency and traceability, a CBDC would also substantially reduce corruption and illicit financial flows, as every transaction on the ledger would leave a clear, auditable trail. There would be no room for unexplained anomalies. Through CBDCs, any form of cash-based opacity would effectively be replaced by on-chain transparency, enabling BNM and the government to maintain a clear and comprehensive view of all transactions and monetary movements.

For these reasons, it is believed that if any form of tokenised money were to be introduced in Malaysia, CBDCs would have a particularly strong case, and would likely be the first form of tokenised money implemented, given their inherent policy advantages and the level of control they afford.

Tokenised deposits

When referring to tokenised deposits, it essentially means that banks are tokenising their clients’ deposits, ie, representing existing customer deposits in digital token form on a distributed ledger. These tokens still represent the same underlying liability of the bank to its depositor, just expressed in a different technological format.

In other words, the bank is the issuer of those tokenised deposits, but what it is actually doing is converting or representing its customers’ existing deposits as digital tokens that can move and settle instantly on-chain. The key point is that the nature of the deposit does not change, but it remains a regulated bank deposit, covered by deposit insurance, and redeemable 1:1 for fiat currency.

Similar to fiat currency, tokenised deposits can also be used for payments, settlements and remittance purposes as instructed by clients of the banks. These deposits are represented as digital tokens on a distributed ledger, so they can move directly between participating institutions and clients without the need for traditional intermediaries such as correspondent banks or clearing agents. This means that a client could instruct their bank to transfer tokenised deposits to another party, whether locally or across borders, and the transaction would be executed in real time on-chain.

The on-chain nature of tokenised deposits makes these transactions substantially faster and often more cost-efficient compared to conventional payment systems. Given that the transaction occurs on-chain, settlement can take place almost instantaneously, eliminating the typical T+1 or T+2 settlement cycles common in today’s banking systems. Similarly, costs are reduced due to the absence of multiple intermediaries, minimal manual reconciliation and greater automation enabled through smart contracts. Whereas, for cross-border remittances, the use of tokenised deposits among interconnected banks can bypass multiple correspondent relationships, thereby improving speed and reducing transfer fees.

Stablecoins

Essentially, a stablecoin is a type of token minted on the blockchain with a stable or fixed value. Stablecoin is most commonly pegged to the value of a specific country’s currency. The core idea is that it is pegged 1:1 to that currency. Think of it as a digital twin of fiat currency, engineered to exist and operate entirely within the blockchain ecosystem.

A broad and commonly used example would be USDT or USDC, which are widely adopted by many digital asset players and companies for blockchain-based transactions. These tokens are minted on the blockchain and pegged to the US dollar on a 1:1 basis, and the same concept can apply to other currencies, not just the USD. In theory, and increasingly in practice, any national currency, be it the ringgit, euro, yen or pound, can also be mirrored on-chain through a stablecoin, as long as the peg is maintained.

Fiat-backed stablecoins are currently regarded as the most trusted and stable form of stablecoin in the market. This model represents the purest type of stablecoin, as it is fully and wholly backed by actual fiat currency held in a treasury.

In this structure, for every one stablecoin minted on-chain, there is an equivalent one unit of fiat currency deposited and held in reserve, and this means the stablecoin is 100% fully backed by real-world fiat currency.

In the market, this model is widely accepted as the most robust and reliable form of stablecoin. In theory, the risk of a “bank run” is very low, because in the event of redemption, there should always be sufficient fiat currency available in the treasury to fulfil redemptions. In practical terms, this means that if 100 million stablecoins are in circulation, there should be 100 million units of fiat currency in reserve to support them. However, the reality is often slightly more complex.

Instead of keeping 100% of reserves in idle cash, which would earn almost no yield, issuers often deploy those reserves into low-risk, short-term instruments such as government bonds, US Treasuries, or money market funds. While these are highly liquid and considered safe, the risk is not absolute zero. In an extreme black swan event – say, a sudden mass redemption request – the issuer might be forced to liquidate those positions prematurely, possibly at a loss; even if the loss is marginal, it introduces operational stress and reputational exposure.

Nevertheless, this model remains widely accepted by regulators and institutional investors as the most legitimate and “institution-grade” form of stablecoin in today’s market.

Technical and regulatory considerations in context

Regardless of whether it involves CBDCs, tokenised deposits or stablecoins, for any form of tokenised money to properly take shape, ultimately there are two key hurdles that must be addressed: technical risks and regulatory risks.

Technical risks consideration

From a technical standpoint, there remains the underlying challenge often described as the “one chain to rule all” dilemma. Ultimately, whether it is BNM, financial institutions, institutional players, or even global participants, there must be a consensus on which blockchain infrastructure to adopt. While tokenisation is undoubtedly an exciting and transformative concept, the reality is that there are hundreds of different blockchains, both public and private, each varying in transaction speed, cost, scalability, uptime and governance. Not all blockchains are created equal.

The last thing the financial ecosystem would want is to rely on multiple bridges merely to move assets across chains, as this would defeat the very purpose of on-chain efficiency. The true promise of tokenisation lies in speed and cost efficiency. Once multiple bridges are introduced, they inherently increase transaction risk (such as potential wormhole exploits), elevate costs and reduce processing speed, defeating the very benefits tokenisation aims to deliver.

Regulatory risks consideration

On the regulatory front, any form of tokenised money that touches payment systems in Malaysia inevitably leads back to the Financial Services Act 2013 (FSA). Under the FSA, besides Malaysia’s official fiat currency, the Malaysia ringgit, all other means of payment that are commonly used 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. Where it is of the opinion:

“(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:

• charge cards;
• credit cards;
• debit cards; and
• electronic money.

In other words, should stablecoins, tokenised deposits, 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 formally designated as a payment instrument.

Conclusion

Of course, at this stage, firms are seeking to help clients position themselves strategically for what is to come. Based on our ongoing interactions and discussions with BNM, the SC and various industry players, one consistent message continues to emerge: tokenised money is certainly coming, and it is likely to arrive sooner rather than later.

An informed assessment, based on current momentum, would suggest that in 2026 there will be meaningful regulatory and industry developments in this space. As such, corporations operating within the financial, technology or capital markets ecosystem would be well advised to pay close attention to these developments and begin preparing for the transition towards a tokenised financial landscape.