Malaysia Crypto Assets Market Analysis Report

1. Introduction

Malaysia Blockchain Week is the country's leading blockchain event. The most notable aspect is the active participation of regulators, who previously held a conservative attitude towards the Crypto Assets industry, now engaging in constructive discussions on the industry's development.

The government's involvement signifies that Malaysia's Crypto Assets ecosystem is moving towards institutional acceptance. The event connected diverse industry participants and expanded the communication channels between the government and the private sector.

2. Three Key Features of the Cryptocurrency Market in Malaysia

The cryptocurrency market in Malaysia has three key characteristics: a melting pot of Southeast Asia, a breeding ground for global champions, and a world center for Islamic finance.

Malaysia is a multilingual country, with a population proficient in Malay, English, Chinese, and Tamil. This diversity creates a natural blend of Eastern and Western cultures. Malaysia also has a strategic geographic location. From Kuala Lumpur, flights to major Southeast Asian cities such as Ho Chi Minh City, Bangkok, and Jakarta are all within two hours. This convenience makes cooperation across different cultures possible and accelerates business expansion.

These conditions cultivate talents with a global perspective. In addition to language skills, people naturally develop cross-cultural understanding abilities. Although the Malaysian market is small, major Crypto Assets projects originated here. Etherscan, Jupiter, Virtuals Protocol, and CoinGecko all started in Malaysia and now have a global influence.

Malaysia's Islamic finance integration has created unique opportunities. Malaysia operates the world's largest Islamic finance center, making compliance with Islamic law (Shariah) a mandatory requirement for Crypto Assets businesses. This requirement has fostered innovation rather than restriction. Malaysia was one of the first to recognize that Crypto Assets comply with Islamic law, launching Shariah-compliant Bitcoin funds and facilitating Crypto Assets zakat payments. These developments link Crypto Assets to the global Islamic finance market, which is expected to reach $10 trillion by 2030.

3. The Evolution of Crypto Assets Regulation in Malaysia

Phase One: Establishing a Regulatory Framework for Digital Assets ( 2019-2020 )

Malaysia is one of the countries in Asia that is rapidly establishing a regulatory framework for digital assets. In 2019, the Capital Markets and Services (Designated Securities) (Digital Currency and Digital Token) Act 2019 classified digital assets into two categories: digital currencies and digital tokens. Assets that meet specific criteria become securities regulated by the Securities Commission of Malaysia.

The Securities Commission has revised its "Recognized Market Guidelines," requiring digital asset exchanges to register as recognized market operators. Exchanges must meet strict requirements: a minimum paid-up capital of 5 million ringgit, stringent governance standards, and local incorporation. These measures enhance the stability of exchanges and investor protection.

The types of regulated entities include:

• DAX (Digital Asset Exchange) operator: provides Crypto Assets spot trading services
• IEO (Initial Exchange Offering) operator: managing token issuance and investor recruitment platform
• Digital Asset Custodian: Provides Crypto Assets custody and management services

In 2020, Malaysia released detailed operational guidelines to strengthen the regulatory framework. These guidelines classify IEO and DAC as independent business categories, each requiring registration as recognized market operators.

As of 2025, there are 12 companies operating as recognized market operators for digital assets: 6 cryptocurrency exchanges, 4 custody service providers, and 2 IEO platforms.

Phase Two: Strengthening Law Enforcement and Blocking Overseas Exchanges to Protect Investors ( 2021-2024 )

After establishing a regulatory framework, the Securities Commission strengthened law enforcement through proactive market controls. The Securities Commission did not stop at formulating rules but actively combated illegal elements to enhance the credibility and security of the regulatory ecosystem.

The Securities Commission pursues two core objectives: to maintain regulatory consistency by blocking unregistered foreign exchanges operating illegally in Malaysia; and to prevent investors from being harmed by using unauthorized platforms. The Securities Commission has created an "Investor Alert List" to warn users in advance. This list includes certain global exchanges. The Securities Commission has repeatedly emphasized that trading on these platforms is not protected under Malaysian law.

Since 2021, the Securities Commission has shifted from passive measures to direct and robust enforcement. In July 2021, the Securities Commission ordered a certain exchange to cease providing services to Malaysian users within 14 days and to shut down all channels, including its website. After 2022, as the Crypto Assets market faced global crises including the bankruptcy of FTX and the collapse of Terra Luna, Malaysia strengthened its regulatory approach. The Securities Commission pointed out that these events occurred in an unregulated environment and took similar actions against several unauthorized exchanges.

These measures go beyond the scope of formal sanctions. Regulatory agencies have implemented comprehensive blocking and market exit strategies. The Securities Commission collaborates with internet service providers to block the websites of targeted exchanges and requests mainstream app stores to remove exchange applications. Meanwhile, the central bank and tax authorities instruct local banks to prohibit deposit and withdrawal services with unauthorized platforms. Authorities have also strengthened sanctions against individual investors. Investors confirmed to use P2P trading or unauthorized exchanges will have their bank accounts frozen, financial products restricted, and cars and mortgages recalled early.

Phase Three: Malaysia's Rapid Transformation After Trump's Election ( From 2025 to Present )

After Trump's election, the cryptocurrency market in Malaysia rapidly developed. Prime Minister Anwar Ibrahim discussed cryptocurrency with former Thai Prime Minister Thaksin in January, and then held talks with the founder of an exchange in April to discuss developing Malaysia as a digital asset hub. These actions indicate Malaysia's intention to lead regional digital financial policies as the rotating chair of ASEAN. Compared to last year, Malaysia's Web3 market has grown rapidly, marking a turning point since Trump's election.

The government's political commitment quickly translates into concrete policy changes. Prime Minister Anwar directly launched the "Digital Asset Innovation Center" in June 2025 as the first significant achievement. The Bank Negara Malaysia leads this regulatory sandbox. This sandbox will serve as a secure testing environment. It will actively encourage experimentation and innovation in digital assets. At a blockchain industry roundtable hosted by a Malaysian digital economy company, Digital Minister Gobind Singh also announced the establishment of the "Digital Assets and Blockchain Working Committee," highlighting the government's systematic approach.

At the same time as the infrastructure for policy is being built, the development of technological infrastructure is also accelerating. The Minister of Science, Technology and Innovation, Dr. Zheng Likan, announced the official launch of Malaysia's blockchain infrastructure at the opening ceremony of the Malaysia Blockchain Week 2025. This infrastructure is developed in collaboration between the government agency Malaysia Microelectronics Systems Research Institute and the local mainnet project Zetrix. The project explores practical blockchain applications ranging from enhancing government transparency to halal certification, as well as improving trade and supply chain efficiency.

The most significant change is the easing of regulations by the Securities Commission. The Securities Commission is transitioning from a strict approval review model to a substantial deregulation through the "Consultation Document" released in June 2025. As of July 2025, only 23 Crypto Assets that have undergone strict scrutiny by the Securities Commission can be listed on local exchanges. Under the new regulatory framework, exchanges can make independent listing decisions without prior approval from the Securities Commission, as long as they meet specified standards.

However, what the Malaysian regulatory authorities are pursuing is not a simple relaxation of regulations. The authorities are strengthening operational requirements, such as increasing the paid-up capital of exchanges and introducing a self-regulatory model, while maintaining a conservative stance on high-risk crypto assets, including privacy coins, meme coins, and stablecoins. This approach seeks to strike a balance between market autonomy and stability.

These policy changes indicate Malaysia's strategic intent to compete with Singapore and Hong Kong to become a major Web3 hub in the Asia-Pacific region. Coupled with the Trump administration's pro-Crypto Assets policies, Malaysia is positioning itself as a key bridge connecting Western capital with Asian markets.

4. Key Areas Analysis of the Cryptocurrency Market in Malaysia

4.1. Centralized Exchange

Malaysia operates six recognized local crypto asset exchanges. Luno dominates with over 90% of local trading volume, forming a winner-takes-all structure similar to other Asian countries like South Korea and Thailand. However, the newly launched exchange Hata showed rapid growth last year, seemingly injecting new vitality into the market. Sinegy is also a major player, providing crypto asset trading services for businesses and institutional investors.

The actual influence of local exchanges remains limited. Despite regulatory efforts to block unauthorized exchanges, many investors continue to actively use global platforms through workarounds. It is estimated that 40-60% of Malaysia's total trading volume of Crypto Assets occurs on global exchanges.

In addition, the small size of the Malaysian Crypto Assets market poses challenges for local operators. Although Luno holds over 90% of the local market share, trading volume remains limited. Luno's daily trading volume is about 200 times lower compared to Upbit in South Korea. According to the central bank's 2024 annual report, by the end of 2024, the cumulative deposits from banks net inflow into locally registered digital asset exchanges accounted for less than 1% of the total deposits in the banking system, representing approximately 0.4% of the market capitalization of securities listed on the Malaysian stock exchange.

The reason investors prefer global exchanges is due to the structural limitations of local platforms. The direct involvement of the securities commission in the approval process for cryptocurrency listings requires a strict procedure. This limits the tradable Crypto Assets to only 23 types. Low liquidity makes large-scale transactions difficult. The lack of margin trading or derivatives reduces the appeal for investors.

Under these restrictions, local exchanges seek survival strategies by operating brokerage services in parallel. They offer over-the-counter trading and stablecoin deposit and withdrawal services outside the exchange. This is particularly aimed at wealthy family offices and digital nomads to generate additional income. The emergence of this business model stems from local exchanges' restrictions on major stablecoins. Insufficient liquidity for large transactions has also contributed to this development.

Malaysia's Crypto Assets tax policy significantly affects the choice of exchanges. Crypto Assets profits are classified as income tax rather than capital gains tax. The government only taxes the amount withdrawn. For example, if someone holds 10 BTC but only withdraws 1 BTC locally, the tax applies only to the withdrawn amount. Airdrops, staking, and DeFi earnings are also subject to income tax. The government monitors Crypto Assets activities by sharing transaction data from local exchanges. Authorities impose additional investigations and sanctions on those who do not declare. This tracking system seems to be the main factor preventing investors from using local exchanges.

4.2. Stablecoin

Malaysian regulators adopt a conservative stance towards stablecoins. Stablecoins pegged to the US dollar, like USDC and USDT, have yet to be listed on local exchanges. Although the central bank has not issued a clear statement on the matter, this cautious approach may stem from policy priorities. The 1998 Asian financial crisis shaped these priorities, as rapid capital flight caused severe economic turmoil. This experience heightened vigilance regarding the stability of the local currency and foreign exchange management.

The recent consultation document from the Securities Commission indicates that this cautious attitude persists. The authorities explicitly pointed out that stablecoins are susceptible to market price fluctuations and may undermine the stability of the local financial system. Regulators do not regard them as mere payment tools, but rather as potential macroeconomic risk factors.

Despite cautious regulation, private sector stablecoin experiments continue. Blox is developing an anchor.