The Securities Commission Malaysia (SC) is looking to liberalize some rules related to digital assets, aiming to foster increased participation of market intermediaries and institutional investors via direct investment in such assets or indirectly via investment funds.
“The industry needs to move from an entrepreneur-led industry to a more institutional-led industry to enhance credibility and instil confidence towards the market,” the SC said in a consultation paper to solicit public feedback by the 11th August 2025.
A key proposal to amend the Digital Asset Exchange (DAX) framework introduced in 2019 is for the SC to no longer issue approvals – with the aim to accelerate the time-to-market process, increase DAX operator accountability and widen product offerings.
The proposals come after Malaysia’s digital asset industry charted the highest total trading value of RM13.9 billion (US$3.32 billion) in 2024 – almost tripling the previous year’s figure. Malaysia is the first country to establish a Shariah compliant framework for digital assets trading. Ancillary digital activities such as the proof of stake model on a blockchain network, was also determined to be Shariah compliant.
While local safeguards have so far insulated Malaysia from major crypto-related scandals and collapses – such as Terra Luna and cryptocurrency exchange FTX – the SC noted “in 2024, the total trading value on Malaysia’s regulated DAXs accounted for 1.1% of the total equity trading value on Bursa Malaysia, and 0.0014% of top 10 global crypto exchanges”.
Another factor is external competition. “Regulated DAXs also face stiff competition from unregulated platforms and avenues, which are often perceived to be more attractive due to factors like broader token offerings and better pricing.”
The SC said regulated digital asset trading is primarily driven by retail investors currently – with institutional participation still limited, though showing signs of growing interest in the sector.
“The low level of institutional involvement extends across the ecosystem including the provision of crypto-related products and services as well as investment in the asset class. This is largely attributed to factors such as risk appetite, and ongoing concerns about credibility and trust.”
To enhance the regulatory ecosystem, a proposed amendment to the Guidelines on Recognized Markets related to DAXs is that at least 90% of the investors’ digital assets must be held in offline wallets (cold wallets) for each type of digital asset listed on its platform. The rest held in online wallets (hot wallets) must be fully collateralized with an equivalent amount in the DAX’s own offline wallet.
DAX operators must perform daily reconciliations on its asset holdings (including investors’ assets), where the DAX wallet address and trust account for local transactions shall be distinct and separate from its foreign digital asset transactions.
Furthermore, DAX operators that facilitate the custody of digital assets on behalf of its investors must either be registered as a digital asset custodian (DAC) or engage a DAC registered with the SC to provide the custody service.
The existing RM5 million (US$1.19 million) minimum for paid-up share capital is being raised to RM15 million (US$3.58 million). For digital brokers, the minimum RM5 million in shareholders’ funds is to become either RM7 million (US$1.67 million) or 25% of the DAX’s operating expenses. The higher financial provisions will need to be met in a year’s timeframe.
Based on feedback, the SC will assess digital assets which may be of higher risk – like privacy coins, meme coins, stablecoins, nascent utility tokens, digital assets intended to provide benefits to the holders or investors to be used within the DAX as well as offerings which have been traded less than a year on any virtual asset service provider.
“The SC still reserves the right to direct the delisting of a digital asset where the SC considers it necessary for the protection of investors, the public interest, the proper functioning of a recognized market or where the SC deems a DAX unfit to determine the listing of digital assets on its platform.”
