Overview of Cryptocurrency in Malaysia: Dual Regulatory Model

Author: TopologyLab

I. Regulatory Framework

Malaysia adopts a " dual regulation " model for cryptocurrencies, with Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC) jointly assuming regulatory responsibilities. BNM is responsible for national monetary policy and financial stability, and has made it clear that it "does not recognize any privately issued digital currency as legal tender", so crypto assets such as Bitcoin are not legally insolvent and are considered tradable assets. The SC is responsible for incorporating qualified crypto assets into the capital market regulatory system and regulating them as securities products. Overall, Malaysia regulates crypto assets as a security/investment product rather than a currency.

The legal basis of the regulatory system comes from the Capital Markets & Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019, which came into effect in January 2019. The decree gives the Securities Commission regulatory authority and stipulates that as long as crypto assets meet certain investment attributes, they can be regarded as securities. Since then, the SC has successively issued a number of supporting regulations, including the Recognized Market Operators Guidelines and the Guidelines on Digital Assets, which regulate the entry conditions of digital asset exchanges, the initial exchange offering platform (IEO platform) and digital asset custody services. These regulations together constitute the core content of Malaysia's crypto asset regulatory framework.

In terms of specific regulatory measures, Malaysia has set clear licensing thresholds. Digital asset trading platforms (DAX) must register as recognized market operators (Recognized Market Operator – Digital Asset Exchange, RMO-DAX) and meet high standards of compliance requirements, including local registration, minimum capital, strong risk control mechanisms, anti-money laundering measures (AML/CFT) and KYC procedures. In addition, the SC has also introduced the " Digital Asset Custodian (DAC) " system, requiring institutions engaged in asset custody services to have relevant licenses and ensure that customer assets are independently stored, records are clear, and risks are isolated.

It is worth mentioning that for wallet services, if they only provide decentralized software wallet functions, they are not included in the scope of supervision for the time being; but if they also have legal currency exchange or custody functions, they need to obtain corresponding payment or custody qualifications. This differentiated approach takes into account both innovative development and regulatory control.

II. Exchange Supervision and Market Structure

Overview of compliant trading platforms

As of 2025, there are 6 licensed digital asset exchanges (DAX) approved by the SC in Malaysia, including:

1. Luno Malaysia – The most compliant platform in Malaysia, established in 2013, is the first exchange to obtain SC license, supporting transactions of approximately 18 regulated currencies.
2. SINEGY – A local exchange founded in 2017, featuring compliance and security, but supporting a limited number of cryptocurrencies.
3. Tokenize Malaysia – Founded in 2017, it operates in Malaysia, Singapore, Vietnam and other places, and has received investment from local investment bank Kenanga.
4. MX Global – Founded in 2018, a local trading platform that has received investment from Binance and supports trading of major currencies.
5. HATA Digital – received in-principle approval in 2022 and is the fifth licensed DAX with independent USD market trading capabilities.
6. Torum International – Approved in 2024, it is the sixth DAX, positioned as a “social + finance” platform and is still in the pre-launch preparation stage.

The above platforms are all RMO-DAX, which is connected to the local banking system and supports recharge, withdrawal and currency exchange in Malaysian Ringgit (MYR), forming the foundation of Malaysia's compliant digital asset service ecosystem.

Supported currencies and regulatory scope

According to the Securities Commission, every digital asset listed on a licensed exchange must be approved. As of early 2025, there are 22 types of cryptocurrencies approved for online trading , including mainstream coins (such as BTC, ETH, XRP), public chain coins (such as SOL, ADA, DOT, MATIC), DeFi coins (such as UNI, AAVE, CRV), etc.

It is worth noting that no stablecoins (such as USDT, USDC) or privacy coins (such as XMR, ZEC) have been approved for trading . This shows that Malaysian regulators are cautious in currency selection and focus on controlling foreign exchange risks and money laundering risks.

Among them, Luno is the platform with the most tokens, covering almost all regulated currencies; Tokenize is second, supporting 7 mainstream currencies; HATA and MX Global support between 5 and 10 currencies. SC will update the token approval list every year, for example, Worldcoin will be added in 2024, and Hedera (HBAR) and The Graph (GRT) will be approved to go online in the first half of 2025, bringing the total number of currencies from 19 to 22.

III. Fund Inflow and Outflow Mechanism and Foreign Exchange Control

Deposit and withdraw fiat and cryptocurrencies

Licensed exchanges in Malaysia generally support deposits and withdrawals in the local currency, Malaysian Ringgit (MYR). Users can deposit fiat currency into exchange accounts through local bank transfers and then convert them into cryptocurrencies; they can also sell their crypto assets and withdraw them to their bank accounts in MYR. Most platforms do not charge bank deposit fees, and withdrawals usually charge a symbolic fee (such as Luno only RM0.10 per withdrawal), so the overall threshold is relatively low.

In addition, investors can also transfer cryptocurrencies of compliant currencies from their personal on-chain wallets to exchanges for trading, and after the transaction is completed, they can withdraw the assets to their on-chain wallets. This arrangement provides users with a two-way flow channel for fiat currency and digital assets. However, all funds in and out are subject to real-name verification and anti-money laundering review procedures, especially for large or abnormal withdrawals, the platform will implement additional reviews.

Foreign exchange controls and cross-border movement restrictions

Malaysia has long implemented strict capital control policies and has banned the ringgit from trading in offshore markets since the Asian financial crisis in 1998. In order to prevent the formation of capital outflow channels through crypto assets, Malaysian regulators have implemented the following measures on exchanges:

• Only MYR-denominated transactions are allowed : The exchange is not allowed to offer trading pairs denominated in USD or other foreign currencies, nor is it allowed to trade stablecoins (such as USDT, USDC).
• Withdrawals are limited to local bank accounts : Fiat currency withdrawals must be remitted to the user's local bank account, and withdrawals to third-party accounts are strictly prohibited.
• Cryptocurrency withdrawal review : Although technically allowing users to withdraw coins to personal wallets, platforms often set up delays or additional review processes. For example, MX Global explicitly states that cryptocurrency withdrawals require a certain processing time to ensure compliance.

These designs effectively prevent crypto assets from becoming a tool for transferring funds, making it difficult for investors to convert highly volatile currencies such as Bitcoin and Ethereum into foreign currency assets for foreign exchange transfers. The basic position of supervision is: " Do not prohibit trading behavior, but control cross-border use ."

IV. Fund Custody Model and Customer Asset Protection

Centralized custody trading model

All licensed exchanges in Malaysia adopt a centralized custody trading model, which means that users need to recharge their assets to a wallet or account on the platform to trade, and cannot use their personal on-chain wallet to directly match or trade on the chain. In this model, the assets held by investors are kept by the platform custodian, and individuals only check their balances and place orders through their platform accounts.

The platform needs to ensure that customer assets are strictly isolated from company assets and adopt appropriate cold wallet/multi-signature custody mechanisms. This requirement comes from the "Digital Asset Guidelines" and "Customer Asset Protection Guidelines" formulated by the SC, with the aim of preventing the platform from misappropriating user assets or asset losses.

Custody arrangements and regulatory requirements

The Malaysian SC introduced the " Digital Asset Custodian (DAC) " system, setting a special regulatory threshold for institutions that provide token custody services. As of the end of 2023, three institutions including CoKeeps have obtained DAC principle approval.

Before the full implementation of the DAC mechanism, most platforms entrust third-party international custodians to custody digital assets:

• Luno Malaysia : Cooperates with BitGo to custody digital assets, while fiat currency funds are held in trust by local trust institution MTrustee.
• Tokenize : Asset custody is jointly performed by BitGo and Universal Trustee.
• SINEGY : It also adopts an independent custody solution to ensure the independence of customer assets.

The SC requires all licensed exchanges to:

• Maintain a 1:1 reserve ratio and customer assets may not be used for other purposes.
• Implement regular asset audits and Proof of Reserves report disclosures.
• The platform is prohibited from engaging in any form of customer asset lending or leveraged investment.

This system design, especially after the FTX incident, is of great significance to safeguarding investor confidence. Since the assets of the Malaysian platform are managed by a third party and cannot misappropriate customer assets, it has shown greater robustness and regulatory credibility in the global market shocks.

5. Market Status and Platform Competition Landscape

The Malaysian crypto asset market has shown a steady growth trend in recent years. Despite its late start, compliant exchanges have gradually established a local user base and operating scale thanks to a clear regulatory framework and increased investor confidence. As of the end of 2021, the annual trading volume of the national crypto market has reached approximately 21 billion ringgit (approximately US$5 billion). In 2022, the number of new digital asset trading accounts reached 128,000 , which is comparable to the scale of account openings in the traditional securities market.

In terms of the platform competition landscape, it presents a highly concentrated structure. As the earliest approved exchange, Luno Malaysia has always been in an absolute leading position in the market. According to its public data in 2024, the platform has more than 1 million registered users, more than 72 million cumulative transactions, and total managed assets of RM4.28 billion . The annual transaction volume reached RM87 billion , accounting for more than 90% of the entire licensed exchange market. Luno has advantages in currency support, user experience and compliant custody, and is firmly in the market leader.

The market share of other exchanges is relatively limited, but they also have their own characteristics and development paths:

• Tokenize Malaysia has a certain degree of recognition among local traditional financial users due to its investment background in Kenanga, and has launched some currencies that are not covered by Luno;
• MX Global has received investment from Binance and has seen significant user growth since 2022, becoming the fastest growing platform outside of Luno.
• HATA Digital started online testing in 2024 and has attracted the attention of professional users due to its USD trading zone and external liquidity integration capabilities.

Overall, the Malaysian compliance market is still dominated by Luno, while other platforms are developing in a differentiated manner . The number of users and transaction volumes of platforms such as Tokenize, MX, SINEGY, and HATA are far lower than Luno, but they use different strategies to attract specific groups.

From the perspective of investor portraits, retail users are the majority, and the younger generation is more prominent . Luno data shows that the average age of its investors is 34.8 years old, with males accounting for 76%, and the median deposit is RM100, showing the typical retail market characteristics of "small amount and high frequency". At the same time, the proportion of female users has increased year by year, and the growth rate in 2024 reached 17%, indicating that market acceptance is constantly expanding. Luno also launched the "Luno Institutional" service in 2024, providing API, OTC liquidity and professional custody, indicating that the platform is actively expanding the high-net-worth customer and institutional market.

Market trading activity is closely related to international market conditions. After the FTX incident in 2022, trading volume declined for a time, but since the recovery of Bitcoin prices in 2023 and the favorable ETFs, trading volume in the third quarter of 2023 increased by more than 300% month-on-month. In 2024, Bitcoin exceeded $100,000 for the first time, further boosting trading willingness and account opening enthusiasm.

The Securities Commission report pointed out that investors under the age of 45 accounted for more than 72% of DAX accounts , reflecting that the market is mainly composed of digital native users. Events such as Worldcoin have also attracted widespread attention, showing that the market is highly sensitive to new tokens, airdrops and innovative applications, highlighting the need to strengthen investor education in the future.

In general, the Malaysian crypto market has established a trading ecosystem with young retail investors as the main body, high platform concentration, and trading activity significantly influenced by global trends, based on clear regulatory policies and platform compliance and security. With the gradual liberalization of token categories and the improvement of the compliance tool system, the market still has the potential for further growth.

VI. Use of unlicensed platforms and regulatory attitudes

Although Malaysia has established a strict licensing system, in the real market, some senior investors are still using overseas unregistered platforms, such as Binance , Huobi , Bybit , etc. These platforms offer a richer range of trading currencies, leverage tools and financial derivatives, which are more attractive to high-frequency traders and users who pursue high returns. Many investors regard local licensed exchanges as " access channels for deposits and withdrawals ", that is, after making profits through unregistered platforms, they transfer assets to licensed platforms and convert them into ringgit.

This phenomenon reflects the limitations of the local compliance market in terms of currency, product types and investment tools, and also exposes the contradiction between the globalization of the crypto industry and local regulation.

In the face of the above situation, the Securities Commission of Malaysia (SC) has taken gradually escalating regulatory actions to form a systematic restriction and punishment mechanism:

1. Investor Alert List System: SC has long maintained and publicly released the " Investor Alert List ", which lists overseas platforms that provide services to local users without registration. For example, Binance, Huobi, and Bybit were included in the list as early as 2020-2021, and the public was clearly informed that " transactions with these entities will not be protected by Malaysian law ."

2. Formal Enforcement and Injunctions:

The SC has issued written orders and public condemnations to large platforms on several occasions:

• Binance (July 2021): The SC ordered it to stop serving Malaysian users within 14 working days, shut down its website, app and marketing channels, and required founder CZ to personally ensure implementation.
• Huobi (May 2023): A similar order was sent to its CEO Li Lin, requiring Huobi to completely withdraw from the E-commerce market.
• Bybit (December 2024): SC announced that Bybit illegally provided DAX services and ordered it to close all trading platforms for Malaysia within 14 days. CEO Ben Zhou was responsible for clearing user assets.

3. Blockade coordination of technical and financial means:

Regulatory actions are not limited to legal texts, but also include technical means to block platforms:

• Local telecom operators block unlicensed platform websites;
• Google Play and App Store removed its related apps in Malaysia;
• The Central Bank (BNM) and the Tax Bureau have jointly banned local banks from providing deposit/withdrawal services to unregistered platforms;
• It is prohibited to provide US dollar stablecoin (such as USDT/USDC) transactions to prevent foreign exchange outflow.

4. Investor education and public admonition:

The SC has repeatedly reminded the public not to invest in unlicensed platforms, otherwise they will bear all risks and will not be able to seek legal recourse . After the FTX incident, many Malaysian users were in trouble because their assets were stored in unprotected platforms overseas, highlighting the importance of compliant transactions.

These crackdowns have achieved phased results. Several international exchanges have announced or defaulted to withdraw from the Malaysian market and stopped providing MYR-related services; local access and top-up volume have dropped significantly. Although some users still use technical means such as VPN to circumvent restrictions, their activity has dropped significantly, and mainstream investors have gradually returned to the local licensed market.

In general, Malaysian regulators have adopted a zero-tolerance attitude towards unlicensed trading platforms , and have established a regulatory bottom line of "compliance-based, risk-at-your-own" through administrative orders, financial blockades, and public opinion propaganda. This series of measures not only reduced the space for illegal trading platforms, but also further promoted the development of the local licensed market and the construction of credibility.

7. Token Issuance System and IEO Platform Supervision

Malaysia has adopted a highly prudent compliance system design for the issuance of digital tokens. According to the Guidelines on Digital Assets issued by the Securities Commission Malaysia (SC), all token issuance activities involving public fundraising, regardless of their functions, such as the right to use, the right to income, or the right to asset mapping, are deemed to be securities issuances and must be included in the regulatory system under the Capital Markets and Services Act. The core of this mechanism is to introduce the " Initial Exchange Offering (IEO)" platform model to replace the project review gaps and weak investor protection problems in the traditional ICO (Initial Coin Offering).

Token issuance qualification

According to the SC’s requirements, companies that intend to issue tokens through IEOs must meet the following conditions:

• Place of registration and operation : Must be a legal entity registered in Malaysia and mainly operating in the country;
• Minimum paid-up capital : not less than RM500,000 to ensure basic financial affordability;
• Corporate governance and equity structure : at least two directors on the issuer's board of directors must be permanent residents of Malaysia, and the senior management must hold a total of no less than 50% of the company's shares and must not transfer a majority of the initial equity before the project is completed;
• Compliance and character standards : Senior executives and major shareholders must meet the “fit and proper” standards and have no bad integrity records.

The above system aims to ensure a high degree of contractual consistency between token issuers and projects, prevent the phenomenon of "fund-raising and cashing out", and improve information transparency and issuer stability.

IEO platform registration and operation mechanism

According to the SC classification, IEO platforms are included in the new category under the "Recognized Market Operator" system. As of 2025, two platforms have obtained registration licenses:

• Pitch Platforms Sdn Bhd (brand name pitchIN): the largest local equity crowdfunding platform, which will start IEO business in 2023;
• Kapital DX Sdn Bhd (KLDX): focuses on digital capital market services, focusing on security tokens and asset tokenization products.

The two platforms will be launched in early 2023 and become the core infrastructure of Malaysia's compliant token issuance market. All digital token issuances to the public must go through such platforms for project declaration, white paper disclosure, fundraising implementation and token delivery.

As an intermediary, the IEO platform’s responsibilities include not only matchmaking transactions, but also full-process due diligence and subsequent supervision of the issuance project. The platform needs to verify the authenticity of the issuer’s operations, the completeness of the white paper content, the rationality of the fundraising plan, and the anti-money laundering compliance mechanism, and has the ability to conduct continuous information disclosure supervision on the project.

Compliance issuance process

The complete IEO token issuance process is as follows:

1. Application and white paper disclosure : The issuer submits a token issuance application to a licensed IEO platform, which reviews its company background, business model and token design. A clear white paper must be submitted to disclose the project structure, fundraising purposes, risk factors, financial planning and token economic model.
2. Platform due diligence and approval : The IEO platform conducts due diligence, focusing on verifying whether the "digital value proposition" of the token is sufficiently innovative, compliant and has market potential. The platform is also responsible for evaluating team qualifications, legal risks and anti-money laundering policies.
3. SC filing confirmation and public sale : After the project passes the platform review, it must complete the filing with SC or obtain a no-objection opinion. After that, the platform will officially release the project and open token subscription.
4. Fundraising and delivery : During the fundraising period (usually several weeks), investors subscribe online through the IEO platform. After reaching the target, the platform will mint and distribute tokens through smart contracts. If the fundraising fails, the funds must be returned in the original way.
5. Subsequent reporting and regulatory disclosure : After the project is successful, the issuer must submit project progress, fund use, financial statements and other materials to the platform every six months and annually, and report to the SC.

The core goal of this system is to institutionalize, monitor and hold accountable the issuance of tokens , and to use platform mechanisms to achieve access control and in-process supervision, thereby minimizing risks and protecting investors.

8. Types and legal status of issuable tokens, market practices and case analysis

The Securities Commission of Malaysia has clearly classified the types of tokens that can be issued through the IEO platform and made detailed definitions of their legal status. Although the nature of tokens is diverse, the SC uses "whether it involves financing behavior and investment return expectations" as the core judgment criteria, divides tokens into three categories , and sets corresponding legal boundaries for their issuance and circulation.

1. Utility Token

Utility tokens are usually used to obtain products, services, discounts or participation rights within a specific platform, and have a similar utility to "digital certificates". Such tokens themselves do not directly correspond to company equity or debt.

However, Malaysian regulators believe that even if it is a functional token, if its issuance involves fundraising and there is an expectation of return from investors (such as price appreciation, future trading profits) , it still needs to be regulated as a security. Therefore, all functional tokens in Malaysia must be issued in compliance with the licensed IEO platform .

In addition, functional tokens can be listed on licensed exchanges, and their prices fluctuate with market supply and demand. They have certain "investment-like attributes", which further deepens the necessity of their supervision.

2. Security Token

Security tokens are essentially a mapping of a company's equity, debt, profit dividends or asset income rights, and their legal status is equivalent to traditional securities. In Malaysia, such tokens must comply with the full set of regulatory requirements such as registration, disclosure, and auditing in accordance with the Capital Markets and Services Act 2007.

The issuance threshold, white paper disclosure requirements, and investor suitability review of such tokens are stricter than those of utility tokens. The SC also requires IEO platforms to conduct special reviews of their fundraising amount, fund use, and project structure.

For example, the fixed-income token launched by the Kapital DX platform in 2024 is a typical security token. Its holders can obtain an annualized interest income of 7.8%-10%. The token also clearly represents the digital division of the income rights of the rehabilitation medical center.

3. Tokenized Real-World Assets (RWA)

This type of token represents the digital mapping of real-world assets (such as real estate, debt, medical institution income rights, etc.), and technically transforms indivisible traditional assets into programmable and tradable digital certificates through blockchain.

Malaysian regulators are open to asset tokenization projects, believing that it will help financial inclusion, asset circulation and transaction efficiency. However, they also emphasize that even if the underlying assets are legal and stable, tokenization itself still needs to fulfill securities regulatory obligations .

In 2025, the SC issued a consultation document that clearly stated that in the future, even if traditional capital market products such as stocks, bonds, and funds are issued through DLT (distributed ledger technology) tokenization, their legal attributes should still be treated as traditional securities . This means that asset tokenization is only the evolution of technical means, and supervision will not be relaxed due to the form.

IEO market practices and representative cases

Since the IEO platform was launched in early 2023, Malaysia has seen a number of representative compliant token issuance projects, and has initially established a practical sample system:

• Integra Healthcare Fixed Income Token (Kapital DX Platform) : Launched in March 2024, it is a fixed-income asset token product used to build a rehabilitation medical center. The issuance is carried out in batches, with an annual return rate of 7.8% to 10%. It is the first compliant security token issuance project in Malaysia, marking a breakthrough in the IEO system from policy implementation to actual financing.
• BidNow Platform Token (pitchIN Platform) : Issued in mid-2024, it is a utility token, and the project is to raise funds for the expansion of the auction e-commerce platform. It attracted 469 retail investors in 8 weeks and eventually raised RM10 million. The token was subsequently successfully listed on the regulated exchange HATA Digital, becoming the first IEO token to be traded and circulated on a local compliant exchange .
• Ni Hsin Group (listed companies participating in IEO) : In 2023, the main board listed company submitted an IEO application to pitchIN through its wholly-owned subsidiary Ni Hsin EV Tech to issue utility tokens related to electric motorcycles. In early 2025, the SC gave conditional approval to the project, marking the official entry of listed companies into the field of compliant token financing and expanding the scope of IEO applicable entities.

Market size and acceptance

As of the end of 2024, the IEO market in Malaysia is still in its early stages, with a limited number of projects but a high degree of compliance . Most of the completed issuances are small and medium-sized financing projects below RM10 million, which is incomparable to traditional IPOs, but provides an innovative financing channel for local SMEs.

As for investors, most of the participants in IEO projects are local retail investors, who have gradually shown interest in compliant digital assets. Especially after the series of popular science lectures and roadshows held by PitchIN, market awareness has steadily increased. Regulators have provided strong protection for retail investors through investment cooling-off periods, quota systems and mandatory information disclosure.

In general, the IEO market in Malaysia is developing at a prudent and steady pace . Regulators attach great importance to project quality and platform due diligence, and platforms and issuers are gradually accumulating operational and disclosure experience. With the increase in project cases and the enrichment of token categories, IEO is expected to become a conventional SME financing tool in parallel with equity crowdfunding in the future.

9. Token Trading and Listing Mechanism

The Securities Commission of Malaysia (SC) clearly stipulates that if the digital tokens issued by the IEO platform are to be circulated in the open market, they must be listed and traded on a licensed digital asset exchange (DAX) . This mechanism ensures that all token transactions open to the public are conducted in a regulated environment, thereby protecting the rights and interests of investors and market order.

Token listing conditions and approval process

Not all tokens issued through IEOs automatically have the right to be listed on the exchange. If a token is to be circulated on DAX, it must meet the dual review of both the regulator and the exchange . The listing process includes:

• Regulatory filing and approval : Exchanges must submit a review application to the SC for each token to be listed. The SC will assess whether the token is issued in a compliant channel, whether it has investor protection measures, and whether there are market risks such as fraud and manipulation.
• Internal review of the exchange : After obtaining no objection from the SC, DAX still needs to conduct due diligence on the token, including but not limited to: token distribution structure, project progress, technical security, development team background, smart contract code audit, etc.
• Listing and announcement mechanism : Once the review is passed, DAX will issue a formal announcement stating the listing time, deposit opening time, trading pair structure and other details, and enable the relevant trading pairs in the system.

This process ensures that every link from token fundraising to circulation is subject to dual supervision by regulators and platforms, preventing tokens from flowing into the gray market or causing market manipulation.

Exchange listing cases

In 2024, BidNow platform token BID became the first token to be issued through IEO and successfully listed on the exchange. It was first issued on the PitchIN platform, and then approved by SC and HATA Digital, and officially listed on the exchange, becoming the first closed-loop example between compliant IEO and the secondary trading market.

In addition, although the fixed-income tokens issued by Kapital DX have not yet been listed on the public DAX trading market, they have provided private trading channels in the "Secondary Circulation" module within the platform for qualified investors to conduct controlled circulation. This tiered circulation system ensures liquidity while retaining prudent supervision of the project.

Differences in the circulation of utility and security tokens

Although the regulatory requirements for the issuance of utility tokens and security tokens are different, there is no significant difference between the two in terms of the circulation mechanism after listing on the exchange . After all tokens are listed on DAX, the price trend is determined by market supply and demand, and investors can trade freely at market prices.

It is important to emphasize that:

• Even if the original meaning of functional tokens is “use rights”, they will be regarded as investment targets by investors due to their price volatility after they are launched.
• Security tokens have their own income rights and are mapped to underlying assets, and their prices are more likely to be affected by the performance of underlying assets and income forecasts.

Therefore, the SC requires the DAX platform to ensure that all tokens have legal sources, transparent information and risk control capabilities before supporting any token transactions, and to implement continuous supervision of trading activities.

Secondary market supervision mechanism

In order to prevent market manipulation and insider trading during the circulation of exchange-listed tokens, the SC has established a supporting secondary market continuous supervision system , which mainly includes:

• Anti-money laundering and real-name requirements (AML/KYC) : All exchange users must complete identity authentication, and the platform must monitor abnormal trading behaviors (such as large-scale short-term transfers and multi-account operations).
• Market manipulation monitoring mechanism : DAX needs to deploy internal monitoring tools to mark and report suspicious behaviors such as price spikes and plunges, order brushing, and high-frequency matching.
• Continuous disclosure obligations : Token issuers must regularly update project information as required, including fund usage reports, development progress, team changes, etc., to maintain market information symmetry.

If the SC finds that there are major anomalies or illegal acts in the transaction of a token, it can order DAX to suspend trading, temporarily remove the token from the shelves, or cancel the listing qualification in accordance with the law. Through this strict supervision, it is ensured that IEO tokens can maintain a legal, stable and transparent operation status after entering the circulation market.

10. Summary and Outlook: IEO System Evaluation, Public Acceptance and Regulatory Trends

Since the Securities Commission of Malaysia officially established the digital asset regulatory framework in 2020, the local cryptocurrency market and token financing mechanism have gradually developed, especially the establishment of the IEO (Initial Exchange Offering) system, which provides institutional guarantees for the legal circulation and compliant fundraising of digital assets. Against the backdrop of rigorous supervision and gradual improvement of the system, Malaysia's digital financial ecosystem is moving steadily towards the direction of "equal emphasis on innovation and security".

The initial results of the IEO system

In terms of system implementation, the IEO mechanism has achieved a closed loop from policy design to actual operation: platform approval, issuance review, token circulation and investor protection all have clear processes and execution responsibilities. Several successful cases, such as the issuance projects of BidNow and Integra Healthcare, show that local project parties and investors are gradually accepting the IEO model.

IEO not only fills the gap of the traditional ICO stage where there is no supervision and chaos, but also greatly enhances investors' confidence in the transparency and legitimacy of the project by using the platform's due diligence and public issuance process as a guarantee mechanism. As an intermediary, the IEO platform not only plays the role of "gatekeeper" before the issuance of tokens, but also bears the responsibility of disclosure and supervision of fund use after the issuance.

In addition, the initial trials of security tokens and asset tokenization products show that regulators are willing to guide the implementation of blockchain technology in traditional financial assets. This has important demonstration significance for promoting the digitization of RWA (real world assets) such as real estate, medical care, and private equity in the future.

Public acceptance and enthusiasm for participation

At the current stage, the public's acceptance of the IEO system is in a balance between "rational observation and small-scale participation". As the number of licensed IEO platform projects is still limited, most investors are still in the initial contact and trial stage.

The BidNow project attracted nearly 500 investors and successfully raised more than RM10 million, indicating that local retail investors have a certain enthusiasm for compliant digital asset investments; but at the same time, the government has not yet applied matching investment funds (such as MyCIF) to the IEO field, indicating that the authorities are still continuing to observe its systemic risk level.

To further expand the participation base, platforms such as PitchIN and KLDX are continuing to carry out investor education programs to enhance public awareness of the legality of token financing, project evaluation methods and transaction risks.

Regulatory agencies’ policy attitudes and trend judgments

The Securities Commission of Malaysia generally adopts a "prudent and open" regulatory attitude towards IEOs. In multiple public statements and policy drafts, the SC has repeatedly expressed its support for the development of digital assets, but at the same time emphasized that it will not sacrifice market integrity and investor protection.

The DLT tokenization consultation document released by the SC in 2025 further indicates that regulators are evaluating the extension of tokenization mechanisms to traditional capital market products (such as stocks, bonds, and fund shares) . This indicates that Malaysia will promote the implementation of the regulation of "on-chain securities" in the future, paving the way for the digital transformation of traditional financial infrastructure.

But at the same time, regulators have continued to strengthen law enforcement against unlicensed exchanges, overseas platforms and illegal ICOs, reiterating that their own laws do not recognize the rights of investors in assets that are not issued in compliance with regulations, and effectively implementing the core principle of "license access + full-process supervision."

Looking ahead: A stable and progressive digital asset policy path

Overall, Malaysia's digital asset regulatory system has gradually formed a relatively complete compliance framework, covering the entire process of regulation from cryptocurrency trading, asset custody to token issuance. In the context of many markets around the world where platforms have collapsed or assets have lost control due to lagging regulation, Malaysia has built a relatively safe and sustainable digital financial ecosystem with its forward-looking and robust regulatory model.

Looking ahead, there is still room for growth in the number of IEO platforms and project types; whether more stablecoins and RWA assets are open for listing will depend on policy risk assessment and actual market feedback. The continued improvement of public participation also depends on the positive demonstration of successful projects and the in-depth promotion of policy advocacy.

As global crypto regulation becomes increasingly stringent, Malaysia may be able to use its institutional stability and legal clarity to attract more local and regional companies to adopt compliant paths for digital asset issuance and trading, thereby promoting it to become one of Southeast Asia's digital financial centers.