Malaysia’s Islamic Capital Market (“ICM”) has evolved into a cornerstone of the national financial system, reaching RM2.7 trillion and accounting for approximately 64% of the country’s total capital market as of the end of 2025.[1] The Securities Commission Malaysia (“SC”), through its Capital Market Masterplan 2026–2030 (“CMP 2026–2030”), launched on 9 March 2026, envisages a strategic transition of the ICM framework from a model focused primarily on Shariah compliance to one that is increasingly purpose-driven. This article seeks to analyse the legal and regulatory framework governing crypto assets in Malaysia, while also examining the key Shariah considerations relevant to the structuring and offering of Shariah-compliant crypto assets.
Under the CMP vision, the ICM is to be anchored by Maqasid al-Shariah (the objectives of Shariah) and the principles of Halal-Toyyib, fostering the development of ethical Islamic financial products that not only satisfy legal and regulatory requirements but also contribute meaningfully to human well-being through the protection of religion, life, intellect, lineage and wealth, while aligning capital deployment with real economic outcomes and sustainable growth. In this regard, the SC had already introduced the Maqasid Al-Shariah Guidance in 2023, and the CMP 2026–2030 reinforces and deepens that direction. The Maqasid Al-Shariah Guidance is structured around six aspirations and 15 guiding principles aimed at strengthening trust and enhancing the ICM’s contribution to society and the real economy.[2]
Against this backdrop, Malaysia’s well-established Islamic finance ecosystem, underpinned by a robust regulatory framework and a solid Shariah governance structure, positions the country as a leading global hub capable of advancing this next phase of development. In parallel, the rapid emergence of crypto assets and blockchain technology has introduced a new frontier in global finance, prompting growing interest within the Islamic finance industry to develop digital assets that are consistent with Shariah principles. The CMP 2026-2030 explicitly highlights tokenisation and blockchain-enabled finance as important mechanisms to harness the efficiency of blockchain technology within this ethical framework. As demand for Shariah-compliant investment products in the digital space continues to increase, it is worth noting that the offering of such products is not without complexity. The characterization, structuring, and distribution of Shariah-compliant crypto assets give rise to nuanced legal and Shariah considerations which must be carefully addressed. It is therefore imperative that such offerings comply not only with applicable legal and regulatory requirements but also with the underlying principles of Islamic jurisprudence.
Crypto assets are generally understood as cryptographically secured digital representations of value or rights that operate on distributed ledger technology and may be transferred or stored electronically for payment, investment, or access purposes. From a technological perspective, crypto assets are characterized by features such as decentralisation, whereby transactions are validated across distributed networks; tokenisation, which enables the digital representation of assets or rights on a blockchain; and the use of smart contracts, which automate transactions based on pre-defined conditions. In January 2019, the SC introduced regulatory oversight of the crypto asset market through the enforcement of the the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 (“Prescription Order 2019”), which was subsequently amended in 2025 via the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) (Amendment) Order 2025 [P.U.(A) 6/2025]. These instruments set out the characteristics of digital currencies and digital tokens that are to be regarded as securities for the purposes of Malaysian securities laws, thereby bringing their offering and trading within the regulatory ambit of the SC. The Prescription Order 2019 defines “digital currency” as a digital representation of value which is recorded on a distributed digital ledger whether cryptographically-secured or otherwise, that functions as a medium of exchange and is interchangeable with any money, including through the crediting or debiting of an account.[3]Meanwhile, “digital token” is defined as a digital representation which is recorded on a distributed digital ledger whether cryptographically-secured or otherwise.[4] The definition of “digital token” was subsequently amended in 2025 and now expressly excludes, among others, debentures, stocks or bonds issued by any government, shares or debentures of a body corporate or unincorporated body, and units in a unit trust scheme or prescribed investments, while including any right, option or interest in respect thereof.[5]
The Prescription Order 2019 further stipulates the conditions under which such assets are deemed securities, particularly where there is an expectation of profit or investment return.[6] Notably, the 2025 amendment also deleted Paragraph 5 of the Prescription Order 2019, which previously provided that prescribed digital currency and digital token offered or traded on a recognised market were not to be treated as shares, debentures, or units in a unit trust or prescribed investment scheme for the purposes of securities laws.[7] With the SC’s subsequent consultation on tokenised capital market products, this amendment appears to support broader tokenisation initiatives within the Malaysian capital market framework. It is also material to note that the SC issued the Guidelines on Digital Assets on 28 October 2020, clarifying that digital currencies and digital tokens are not recognised as legal tender nor as a form of payment instrument regulated by Bank Negara Malaysia (“BNM”).[8]
The operation of platforms facilitating the trading of crypto assets falls within the framework of Recognized Market Operators (“RMO”), under which Digital Asset Exchanges (“DAX”) must be registered and comply with licensing, governance and operational requirements imposed by the SC. These requirements were significantly strengthened via the 13th Revision of the Guidelines on Recognized Markets issued on 6 January 2025, including requirements relating to the fitness and propriety of board members, responsible persons and senior management,[9] processes and contingency arrangements to protect client funds and assets,[10] and periodic compliance audits to be conducted at least once every three years.[11] This reflects Malaysia’s regulatory approach of integrating crypto-related activities within the broader capital markets ecosystem, thereby subjecting such activities to established standards of investor protection, market integrity, and disclosure. In parallel, the issuance of digital tokens for fundraising purposes is primarily conducted through regulated channels such as Initial Exchange Offerings (“IEO”), which are governed by the SC’s Guidelines on Digital Assets.[12] The said guidelines impose requirements on issuers relating to eligibility,[13] whitepaper disclosures[14] and utilisation of proceeds.[15] Beyond trading and issuance, the regulatory framework has also expanded to cover ancillary functions within the digital asset value chain, including custody arrangements through Digital Asset Custodians (“DAC”).[16]
While the legal and regulatory treatment of crypto assets is relatively well-established, their Shariah characterization presents a distinct and more nuanced inquiry. These concerns arise from the distinct features of crypto assets, which differentiate them from traditional asset classes. Consequently, there has been an ongoing debate among Islamic scholars and Shariah economics experts on the permissibility of utilising such assets under Islamic law.[17] The Shariah Advisory Council of the SC (“SAC”) has deliberated on this issue, providing an important foundation for assessing the Shariah compliance of crypto assets. In its ruling[18], the SAC resolved that digital currency may be recognised as māl (asset) from a Shariah perspective, as it possesses value and can be transacted. However, the SAC draws an important distinction in the classification of digital currency. Digital currency that is purely technology-based without any underlying asset is generally categorised as ‘urudh (goods) rather than currency and therefore will not be subjected to the rules of baiʿ al-ṣarf (currency exchange). Conversely, where a digital currency is backed by ribawi items such as gold, silver, or fiat currency, it may be treated as a form of currency and would therefore be subject to the principles governing baiʿ al-ṣarf. Further, where a digital currency is backed by ribawi items other than gold, silver and currency, the SAC treats it as amwal ribawiyyah and subjects its trading to the Shariah rules applicable to ribawi items.
With respect to digital tokens, the SAC similarly recognises them as māl under the category of ‘urudh, subject to specific conditions in determining their Shariah status. In particular, the SAC imposes requirements that the proceeds raised from the token issuance must be utilised for Shariah-compliant purposes and that the rights and benefits attached to the tokens must themselves be Shariah-compliant. Where the structure or underlying activity raises more complex or mixed Shariah issues, a further case-specific Shariah assessment would be required. In furtherance, the SAC has also resolved that the investment and trading of digital assets are permissible, provided that they meet these Shariah requirements and are conducted on registered DAX platforms regulated by the SC. This position reflects a facilitative yet principled approach, recognising the legitimacy of digital assets within Islamic finance while ensuring that their structure and usage remain aligned with core Shariah principles. At the time of writing, the SC lists 15 tradeable digital assets as Shariah-compliant on its official digital assets page, including Bitcoin, Ethereum, Ripple, Litecoin, Solana, Cardano, Polkadot and Stellar. Digital assets not included in this list[19] would require DAX operators intending to offer them as Shariah-compliant to obtain endorsement from the SAC.[20]
The offering of Shariah-compliant crypto assets in Malaysia is subject to a comprehensive set of regulatory and compliance requirements. At the outset, operators must comply with the Capital Markets and Services Act 2007 (“CMSA”) and the framework administered by the SC, particularly the Guidelines on Digital Assets, which govern the operation of DAC and IEO operators, as well as the Guidelines on Recognized Markets which govern DAX operators. Under these guidelines, operators are required to satisfy stringent requirements relating to governance,[21] financial resources,[22] risk management,[23] and system integrity,[24] as well as ensure that only eligible digital assets are admitted for trading or offering.[25] In the context of offering Shariah-compliant crypto assets, operators are also expected to implement a robustShariah governance framework. This includes the appointment of a qualified Shariah adviser[26] to provide expertise guidance on the structuring and features of crypto products and to ensure that all applicable Shariah rulings and principles are duly complied with.
In addition, operators must implement investor protection measures, which constitute a core component of the regulatory framework administered by the SC. In this regard, operators of crypto asset platforms are required to adopt robust disclosure standards, including the issuance of clear and prominent risk warnings as well as appropriate safeguarding mechanisms to ensure that investors are adequately informed of the volatility and inherent risks associated with crypto assets.[27] Furthermore, operators are obliged to maintain proper custody and asset protection arrangements, including the segregation of client assets[28] and the implementation of adequate cybersecurity controls.[29] These regulatory requirements resonate closely with fundamental Shariah principles, particularly those of transparency, fairness, and the prohibition of excessive uncertainty (gharar). Accordingly, the obligation to publish clear and comprehensive whitepapers[30] and disclose all material information relating to the crypto asset[31]to investors should not be viewed merely as regulatory formalities. Rather, such measures reflect Shariah’s insistence on informed consent in contractual dealings, ensuring that all parties enter into transactions with full knowledge and understanding of the relevant risks and rights involved.
Furthermore, operators are also subject to anti-money laundering and counter-terrorism financing (“AML/CFT”) obligations under frameworks issued by both the BNM and the SC. These include implementing robust know-your-customer (“KYC”) and customer due diligence procedures, ongoing transaction monitoring, and the reporting of suspicious transactions, in line with the Anti-Money Laundering, Anti-Terrorism Financing, Anti-Restricted Activity Financing and Proceeds of Unlawful Activities Act 2001 (“AMLA”) and relevant policy documents[32]. It is also pertinent to note that recent amendments to the AMLA framework has expanded liability, whereby directors, officers and employees of reporting institutions can be held personally accountable for compliance failures, facing liability not just for non-compliance but also for failing to adopt and implement internal compliance programmes effectively.[33] In addition, directors, officers and employees are obligated to establish, administer and maintain a system for centralization of customer and transaction data.[34] The imposition of AML/CFT controls aims to enhance the integrity of the market by ensuring that digital asset platforms are not utilised for illicit activities. Collectively, all of these requirements demonstrate that operators offering Shariah-compliant crypto assets must navigate a highly regulated environment that integrates capital market regulation, Shariah governance, and financial crime compliance.
Under SC’s current framework, a registered DAX is not restricted to trading only Shariah-compliant crypto assets. The Guidelines on Digital Assets do not impose a requirement that all digital assets admitted for trading must be Shariah-compliant; instead, the focus is on whether the asset satisfies the SC’s admission and investor protection criteria. In particular, the Guidelines require a DAX operator to ensure that any digital asset proposed for listing has undergone appropriate assessment and is suitable for trading, and to obtain the SC’s concurrence prior to offering a crypto asset that is not already available on another DAX platform.[35] Additionally, where the SC has granted concurrence for the offering of a new crypto asset by a DAX operator, any other DAX operator intending to offer the same asset must demonstrate its operational capabilities to the SC before doing so.[36] These requirements underscore that the regulatory emphasis is placed on suitability, transparency, and market integrity, rather than Shariah status per se. However, where a DAX operator intends to offer or represent a crypto asset as Shariah-compliant via its platform, the DAX operator is required to seek the endorsement of the SAC prior to the offering.[37] Accordingly, while non-Shariah-compliant crypto assets may be traded on a licensed DAX, Shariah compliance operates as an additional layer of governance rather than a mandatory condition for listing.
In conclusion, the offering of Shariah-compliant crypto assets in Malaysia is shaped by a carefully integrated legal and regulatory framework that reflects both the sophistication of the country’s capital market regime and the depth of its Islamic finance ecosystem. From a legal perspective, the classification of digital assets as securities under the CMSA and the application of the Prescription Order 2019 (as amended in 2025) bring such assets squarely within the regulatory ambit of the SC, thereby subjecting their offering and intermediation to established standards of governance, disclosure, and investor protection. Complementing this, the SC’s Guidelines on Digital Assets and Guidelines on Recognized Markets impose operational, financial, and risk management requirements on operators, ensuring that digital asset activities are conducted within a controlled and transparent environment. Beyond regulatory compliance, the incorporation of Shariah principles introduces an additional and equally critical dimension. The resolutions of the SAC affirm that crypto assets may be recognised as māl, but their permissibility ultimately hinges on the structure, rights, and underlying economic substance of the asset, as well as the utilisation of proceeds.[38] This underscores a fundamental principle; Shariah compliance in the context of crypto assets is not determined by label, but by the manner in which such assets are structured and operated. Accordingly, operators seeking to offer Shariah-compliant crypto assets must adopt a holistic approach that integrates regulatory requirements with robust Shariah governance.
At the same time, the evolving nature of crypto assets presents ongoing challenges, including technological risks and issues of Shariah standardisation across jurisdictions. These challenges necessitate continuous engagement between regulators, industry participants, and Shariah scholars to ensure that innovation remains aligned with both legal requirements and the objectives of Shariah. Notwithstanding these complexities, Malaysia’s dual framework which is anchored in regulatory clarity and principled Shariah governance positions it uniquely to lead the development of Shariah-compliant crypto assets. With continued refinement of its regulatory policies, strengthening of institutional capabilities, and advancement of industry practices, Malaysia is well placed to emerge as a global hub for the offering of Shariah-compliant crypto assets, bridging the gap between technological innovation and ethical finance.
Published Date: 13 May 2026
Authors:
- Muhammad Afif bin Che Had
- Nor Aqilah binti Mohamad Zaki
References:
[1] Securities Commission Malaysia (2025), Capital Market Masterplan 2026-2030
[2] Securities Commission Malaysia (2023), Maqasid Al-Shariah Guidance Islamic Capital Market Malaysia; see also SC media release dated 30 October 2023
[3] Section 2 of P.U.(A) 12/2019
[4] Ibid
[5] Section 2 of P.U.(A) 6/2025
[6] Section 3 of P.U. (A) 12/2019
[7] Section 3 of P.U. (A) 6/2025
[8] Paragraph 1.04 of Securities Commission Malaysia Guidelines on Digital Assets (revised 19 August 2024)
[9] Paragraph 3.01(g) of Securities Commission Malaysia Guidelines on Recognized Markets (revised 6 January 2025)
[10] Paragraph 15.28 of Securities Commission Malaysia Guidelines on Recognized Markets (revised 6 January 2025)
[11] Paragraph 6.01(o) of Securities Commission Malaysia Guidelines on Recognized Markets (revised 6 January 2025)
[12] Paragraph 1.03 of Securities Commission Malaysia Guidelines on Digital Assets (revised 19 August 2024)
[13] Chapter 6 of the Securities Commission Malaysia Guidelines on Digital Assets (revised 19 August 2024)
[14] Chapter 8 of the Securities Commission Malaysia Guidelines on Digital Assets (revised 19 August 2024)
[15] Paragraph 9.04 and 9.05 of Securities Commission Malaysia Guidelines on Digital Assets (revised 19 August 2024)
[16] Part D of the Securities Commission Malaysia Guidelines on Digital Assets (revised 19 August 2024)
[17] Md Tahir, S. N., Md Sawari, M. F., Zakaria, M. S., & Ozdemir, S. Z. (2025). Digital Assets from Islamic Perspective (2019-2024): A Systematic Literature Review. The Journal of Muamalat and Islamic Finance Research, 22(1), 85–101. https://doi.org/10.33102/jmifr.635
[18] Securities Commission Malaysia, The 233rd and 234th Shariah Advisory Council of the Securities Commission Malaysia Meeting (29 June 2020 and 20 July 2020): Digital Assets from Shariah Perspective
[19] Digital assets such as Synthetix, Maker, Curve DAO, Aave, Near, Algorand, Hedera, The Graph
[20] Digital assets, https://www.sc.com.my/digital-assets
[21] Chapter 4 of Securities Commission Malaysia Guidelines on Recognized Markets (revised 6 January 2025) and Chapter 26 of Securities Commission Malaysia Guidelines on Digital Assets (revised 19 August 2024)
[22] Paragraph 15.03 of the Securities Commission Malaysia Guidelines on Recognized Markets (revised 6 January 2025) and Chapter 14 and Paragraph 24.01 of the Securities Commission Malaysia Guidelines on Digital Assets (revised 19 August 2024)
[23] Paragraph 15.10 of the Securities Commission Malaysia Guidelines on Recognized Markets (revised 6 January 2025) and Paragraph 17.06 and 27.04 of Securities Commission Malaysia Guidelines on Digital Assets (revised 19 August 2024)
[24] Paragraph 15.01(f) of Securities Commission Malaysia Guidelines on Digital Assets (revised 19 August 2024)
[25] Paragraph 15.16 of Securities Commission Malaysia Guidelines on Digital Assets (revised 19 August 2024)
[26] Paragraph 23.08 of Guidelines on Islamic Capital Market Products and Services
[27] Paragraph 6.01(j) of the Securities Commission Malaysia Guidelines on Recognized Markets (revised 6 January 2025)
[28] Paragraph 15.28(e) of the Securities Commission Malaysia Guidelines on Recognized Markets (revised 6 January 2025)
[29] Paragraph 15.01(f) of Securities Commission Malaysia Guidelines on Digital Assets (revised 19 August 2024)
[30] Chapter 8 of the Securities Commission Malaysia Guidelines on Digital Assets (revised 19 August 2024)
[31] Paragraph 15.42 of Securities Commission Malaysia Guidelines on Recognized Markets (revised 6 January 2025)
[32] Securities Commission Malaysia Guidelines on Prevention of Money Laundering, Countering Financing of Terrorism, Countering Proliferation Financing and Targeted Financial Sanctions for Reporting Institutions in the Capital Market (revised 13 June 2024)
[33] Section 18 (c) of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities (Amendment) Act 2025
[34] Section 14 of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities (Amendment) Act 2025
[35] Paragraph 15.17 of Securities Commission Malaysia Guidelines on Recognized Markets (revised 6 January 2025)
[36] Paragraph 15.18 of Securities Commission Malaysia Guidelines on Recognized Markets (revised 6 January 2025)
[37] Paragraph 38.07 of Guidelines on Islamic Capital Market Products and Services
[38] Securities Commission Malaysia, The 233rd and 234th Shariah Advisory Council of the Securities Commission Malaysia Meeting (29 June 2020 and 20 July 2020): Digital Assets from Shariah Perspective
