Malaysia’s central bank, Bank Negara Malaysia (BNM), has signaled increased interest in asset tokenization and digital asset technologies as part of its long-term financial innovation strategy. However, the regulator remains firm in its decision not to recognize cryptocurrencies as legal tender, according to the central bank’s 2024 annual report published on March 24.
The report highlights the potential benefits of tokenization while underscoring a cautious approach toward broader crypto adoption, positioning the country to explore blockchain-powered financial efficiencies without embracing unregulated digital assets.
Crypto Usage Still Minimal in Malaysia’s Financial System
BNM noted that despite an increase in trading activity, crypto assets remain a small part of the Malaysian financial landscape. As of the end of 2024, crypto assets represented less than 1% of total banking system deposits and only 0.4% of the market capitalization of securities listed on Bursa Malaysia, the country’s national stock exchange.
“The crypto market remains active but small compared to the overall size of the domestic financial market,” the report stated.
Despite limited banking impact, crypto trading in Malaysia saw explosive growth in 2024. According to the report, total crypto trading volume surged to approximately $3.06 billion, up from $1.19 billion in 2023, marking a year-on-year growth of around 157%.
Tokenized Deposits and CBDCs Under Review
While reiterating that cryptocurrencies will not be recognized as legal tender, BNM emphasized its interest in regulated asset tokenization and central bank digital currencies (CBDCs).
The central bank is particularly focused on how tokenized deposits, issued by regulated financial institutions, could serve as a credible on-chain settlement asset, complementing a potential wholesale CBDC framework.
“Asset tokenisation within the regulated financial sector is creating new opportunities by enabling programmability, composability and atomicity,” BNM stated in the report.
These programmable financial instruments, the report suggests, could significantly enhance efficiency, transparency, and risk management within Malaysia’s financial ecosystem.
Looking Ahead: Innovation with Caution
As the digital asset landscape evolves globally, Malaysia is taking a measured approach—balancing the exploration of blockchain innovation with the risks associated with crypto markets. The report indicates that BNM will continue monitoring developments in the crypto space, which it expects will keep growing into 2025 and beyond.
The regulator’s stance highlights a broader trend among central banks worldwide: embracing innovation while prioritizing consumer protection and financial stability.
Bank Negara Malaysia’s 2024 annual report reaffirms its commitment to modernizing the financial system through tokenization and digital infrastructure, while maintaining a conservative position on unregulated cryptocurrencies. As global financial institutions continue exploring blockchain-based solutions, Malaysia is laying the groundwork for a tokenized future within a regulated framework.
