Malaysia Cryptocurrency Market 2025: The Invisible Forces Behind Global Web3 Giants

This report is authored by Tiger Research and analyzes the invisible forces behind how Malaysia's builder community has risen to become a global leader in Web3. We thank Lydian Labs, the organizer of the 2025 Malaysia Blockchain Week (MYBW), for their support of this research.

Core Leader Insights

1. Introduction

Tiger Research served as the official research partner for Malaysia Blockchain Week. This event is the country's leading blockchain gathering, hosted by Lydian Labs. Notably, there has been active participation from regulators, who previously held a conservative stance towards the cryptocurrency industry, now engaging in constructive discussions on industry development.

[Image source: MYBW 2025]

The government's involvement marks a shift towards institutional acceptance of Malaysia's crypto ecosystem. The event connected diverse industry participants and expanded communication channels between the government and the private sector. Tiger Research interviewed officials, experts, and local teams during the event. These conversations provided on-the-ground insights that reinforced the analysis in this report.

2. Malaysia's Cryptocurrency Market: Three Key Terms You Need to Know

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

Malaysia is a multilingual country with a population fluent in Malay, English, Mandarin, and Tamil. This diversity creates a natural blend of Eastern and Western cultures. Malaysia also has a strategic geographical location. From Kuala Lumpur, flights to major Southeast Asian cities like Ho Chi Minh City, Bangkok, and Jakarta are all within two hours. This convenience facilitates cross-cultural collaboration and accelerates business expansion.

These conditions nurture talent with a global perspective. In addition to language skills, individuals naturally develop cross-cultural understanding. Despite the small size of the Malaysian market, major cryptocurrency projects have originated here. Etherscan, Jupiter, Virtuals Protocol, and CoinGecko all started in Malaysia and now have global influence.

The integration of Islamic finance in Malaysia creates unique opportunities. Malaysia operates the world's largest Islamic finance center, making compliance with Shariah a mandatory requirement for cryptocurrency businesses. This requirement has spurred innovation rather than restrictions. Malaysia was the first to recognize cryptocurrencies as Shariah-compliant, launching Shariah-compliant Bitcoin funds and enabling zakat payments in cryptocurrency. These developments connect cryptocurrencies with the global Islamic finance market, which is expected to reach $10 trillion by 2030.

3. Evolution of Cryptocurrency Regulation in Malaysia

Phase 1: Establishing a Digital Asset Regulatory Framework (2019-2020)
Malaysia is one of the Asian countries that rapidly established a regulatory framework for digital assets. In 2019, the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 classified digital assets into two categories: Digital Currency and Digital Token. Assets that meet specific criteria became securities regulated by the Securities Commission Malaysia (SC).

The SC revised its Recognised Markets guidelines, requiring Digital Asset Exchanges (DAX) to register as Recognised Market Operators (RMO). Exchanges must meet strict requirements: a minimum paid-up capital of 5 million ringgit (approximately $1.25 million), stringent governance standards, and local incorporation. These measures strengthened the stability of exchanges and investor protection.

Types of Regulated Entities:

• DAX (Digital Asset Exchange) Operators: Provide cryptocurrency spot trading services through order book or brokerage models.

• IEO (Initial Exchange Offering) Operators: Manage token issuance and investor recruitment platforms in a regulated environment.

• Digital Asset Custodians (DAC): Provide custody and management services for cryptocurrencies to institutional and retail investors.

In 2020, Malaysia released detailed operational guidelines to strengthen the regulatory foundation. These guidelines categorized IEOs and DACs as distinct business types, each requiring registration as RMOs. This created tailored regulatory standards for each business type based on their specific characteristics.

As of 2025, 12 companies operate as digital asset RMOs: 6 cryptocurrency exchanges, 4 custody service providers, and 2 IEO platforms.

Phase 2: Strengthening Enforcement and Blocking Offshore Exchanges to Protect Investors (2021-2024)
After establishing the regulatory framework, the SC strengthened enforcement through active market control. The SC did not stop at rule-making but actively targeted illegal elements to enhance the credibility and safety of the regulatory ecosystem.

The SC pursued two core objectives: maintaining regulatory consistency by blocking unregistered offshore exchanges operating illegally in Malaysia; and preventing investors from being harmed by using unauthorized platforms. The SC created an "Investor Alert List" to pre-warn users. This list includes global exchanges such as Binance and Bybit. The SC has repeatedly emphasized that trading on these platforms is not protected by Malaysian law.

[Image source: Securities Commission Malaysia (SC)]

Starting in 2021, the SC shifted from passive measures to direct and forceful enforcement. In July 2021, the SC ordered Binance to cease services to Malaysian users within 14 days and shut down all channels, including its website. After 2022, as the cryptocurrency market faced global crises including the FTX bankruptcy and Terra Luna collapse, Malaysia intensified its regulatory approach. The SC noted that these events occurred in an unregulated environment and took similar actions against unauthorized exchanges like Huobi and Bybit.

These measures went beyond formal sanctions. The regulatory authority implemented comprehensive blocking and market exit strategies. The SC collaborated with Internet Service Providers (ISPs) to block the websites of targeted exchanges and requested Google Play Store and Apple App Store to remove exchange applications. Meanwhile, the central bank and tax authorities instructed local banks to prohibit deposit and withdrawal services with unauthorized platforms. Authorities also intensified sanctions against individual investors. Confirmed users of P2P trading or unauthorized exchanges would have their bank accounts frozen, financial products restricted, and cars and mortgages recalled.

Phase 3: Rapid Transformation of Malaysia Post-Trump Election (2025-Present)

[Image source: Anwar Ibrahim]

Following Trump's election, Malaysia's cryptocurrency market rapidly developed. Prime Minister Anwar Ibrahim discussed cryptocurrency with former Thai Prime Minister Thaksin in January and later held talks with Binance founder Changpeng Zhao (CZ) in April to discuss developing Malaysia as a digital asset hub. These actions indicate Malaysia's intention to lead regional digital finance policy as the ASEAN rotating chair. Compared to last year, Malaysia's Web3 market has grown rapidly, marking a turning point since Trump's election.

[Image source: Gobind Singh Deo]

The government's political commitment quickly translated into concrete policy changes. In June 2025, Prime Minister Anwar directly launched the "Digital Asset Innovation Hub" as the first major outcome. Bank Negara Malaysia (BNM) leads this regulatory sandbox. The sandbox will serve as a safe testing environment, actively encouraging experimentation and innovation in digital assets. At a blockchain industry roundtable hosted by the Malaysian Digital Economy Corporation (MDEC), Digital Minister Gobind Singh Deo also announced the establishment of the "Digital Asset and Blockchain Working Committee," highlighting the government's systematic approach.

[Image source: MYBW 2025]

Alongside policy infrastructure, the development of technological infrastructure is also accelerating. Science, Technology and Innovation Minister Chang Lih Kang officially launched the Malaysia Blockchain Infrastructure (MBI) at the opening ceremony of the 2025 Malaysia Blockchain Week. This infrastructure is co-developed by the government agency Malaysian Institute of Microelectronics Systems (MIMOS) and the local mainnet project Zetrix. The project explores practical blockchain applications ranging from enhancing government transparency to halal certification and improving trade and supply chain efficiency.

The most significant change is the relaxation of regulations by the SC. The SC is shifting from a strict approval review model to significant deregulation through the Consultation paper released in June 2025. As of July 2025, only 23 cryptocurrencies that passed the SC's strict review can be listed on local exchanges. Under the new regulatory framework, exchanges can independently make listing decisions without prior SC approval as long as they meet specified standards.

However, the Malaysian regulatory authorities are not simply pursuing deregulation. The authorities are strengthening operational requirements, such as increasing the paid-up capital of exchanges and introducing self-regulatory models, while maintaining a conservative stance on high-risk cryptocurrencies, including privacy coins, meme coins, and stablecoins. This approach seeks to balance 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. Combined with the pro-crypto policies of the Trump administration, Malaysia is positioning itself as a key bridge connecting Western capital with Asian markets.

4. Key Area Analysis of Malaysia's Cryptocurrency Market

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

The actual influence of local exchanges remains limited. Despite regulatory efforts to block unauthorized exchanges like Binance, many investors continue to actively use global platforms through workaround methods. It is estimated that 40-60% of Malaysia's total cryptocurrency spot trading volume occurs on global exchanges like Binance and Bybit.

Additionally, the small size of Malaysia's cryptocurrency market poses challenges for local operators. While 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 South Korea's Upbit. According to BNM's 2024 annual report, as of the end of 2024, the cumulative deposits from banks net inflow to locally registered DAX accounted for less than 1% of the total deposits in the banking system, approximately 0.4% of the market capitalization of securities listed on Bursa Malaysia.

The preference for global exchanges among investors is due to structural limitations of local platforms. The SC's direct involvement in cryptocurrency listing approvals requires a strict process. This limits the tradable cryptocurrencies to only 23. Low liquidity makes large-scale trading difficult. The lack of margin trading or derivatives reduces the attractiveness for investors.

Under these constraints, local exchanges seek survival strategies through parallel operations in brokerage services. They offer over-the-counter (OTC) trading and stablecoin on/off-ramp services outside the exchange. This particularly targets wealthy family offices and digital nomads for additional income. The emergence of this business model stems from local exchanges' restrictions on major stablecoins like USDT and USDC. The lack of liquidity for large trades also contributes to this development.

Malaysia's cryptocurrency tax policy significantly influences the choice of exchanges. Cryptocurrency 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 cryptocurrency activities by sharing trading data from local exchanges. Authorities impose additional investigations and sanctions on undeclared users. This tracking system appears to be a major factor preventing investors from using local exchanges.

4.2. Stablecoins
Malaysian regulators maintain a conservative stance on stablecoins. Dollar-pegged stablecoins like USDC and USDT have yet to be listed on local exchanges. Although BNM has not made a clear statement on this issue, this cautious attitude may stem from policy priorities. The 1998 Asian financial crisis shaped these priorities, during which rapid capital outflows caused severe economic turmoil. This experience heightened vigilance regarding currency stability and foreign exchange management.

The SC's recent consultation paper indicates that this cautious attitude persists. The authorities explicitly state that stablecoins are susceptible to market price fluctuations and may undermine the stability of the local financial system. Regulators do not view them as simple payment tools but rather as potential macroeconomic risk factors.

[Image source: Dune]

Despite regulatory caution, private sector stablecoin experiments continue. Blox is developing a stablecoin pegged to the ringgit, 'MYRC'. MYRC operates as a fiat-collateralized stablecoin. The token is pegged to the Malaysian ringgit at a 1:1 ratio on the Arbitrum and Ethereum blockchains. Users can mint MYRC by depositing into local bank accounts through the Blox platform. They can similarly redeem it. MYRC is currently in beta testing. The project has achieved a market cap of approximately $700,000, with limited but active trading.

However, regulatory overlap has led to project delays. Malaysia's dual regulation between the SC and BNM has created ambiguity in responsibilities and standards. Blox has been working on this project for three years and has engaged with regulators. Due to uncertain regulatory stances, the company has yet to receive final approval. The lack of a consistent regulatory framework for stablecoins is a core factor in approval delays.

Signs of change are emerging. Prime Minister Anwar recently announced consideration of establishing a regulatory sandbox through the "Digital Asset Innovation Hub." This initiative includes stablecoin experiments based on the ringgit. This central bank-led sandbox will provide a controlled environment for fintech and digital asset companies. Companies can test new technologies and services in these environments.

Given the government's ongoing concerns about capital controls, the initial focus may be on applications within the local financial ecosystem rather than cross-border payments. Potential use cases include 24-hour payment infrastructure, surpassing the traditional 9-hour banking system. Escrow services could leverage conditional payment features. Recent social issues, such as gym closures, have affected refunds for prepaid amounts. Uncertain fulfillment of home renovation contracts creates opportunities. The pilot implementation of "programmable money" could address everyday financial issues.

4.3. NFT Community
Malaysia's NFT market remains sluggish. Many participants who entered at high prices during the NFT boom have suffered losses and exited the market. This aligns with patterns seen in other countries. While there are holders of global projects like BAYC, Azuki, and Milady, activities are mostly limited to small enthusiast gatherings. Malaysia lacks significant local NFT projects.

[Pudgy Penguin local offline event in Malaysia, image source: Pudgy Penguins Malaysia]

The local community of Pudgy Penguins stands out as a notable exception in this environment. This community has established an independent ecosystem that goes beyond a simple network of NFT holders. An open operational approach and inclusive culture have driven this success. The community welcomes anyone to participate freely, regardless of NFT ownership. The entry barrier for newcomers is low.

Community members naturally connect with people from different backgrounds. They form meaningful relationships in a pure atmosphere of fun and positivity that transcends simple information exchange. The community regularly hosts various offline events, such as wine tastings, go-karting, and pickleball. Even during bear markets, members maintain monthly gatherings. The community is also actively involved in external community events, participating in activities from other communities and collaborating through networks and referrals when needed.

[Image source: Pudgy Penguins Malaysia]

The community is preparing 'MY PENGU ACADEMY', an introductory education program for Web3 beginners. This initiative aims to expand the community and diversify participation.

[Image source: Hata Global]

Meanwhile, local exchange Hata has launched a penguin-themed meme coin $PENGU on its global platform (offshore version only). Some Malaysian community members are trading through workaround methods. Given local restrictions on meme coin trading, this structure may provide another incentive for community participation.

Malaysia's NFT market is more based on community activities rather than trading. Among these communities, Pudgy Penguins is the most organized and scalable example. In a smaller market environment, offline networking is becoming increasingly important. The operational model of Pudgy Penguins showcases important insights for this.

4.4. Islamic Finance
Malaysia has established itself as the largest Islamic finance center in Asia. The country holds the top position in the global sukuk market, with an unmatched status. This foundation stems from its Muslim population of over 60%. As of 2024, Islamic finance accounts for about 47% of the entire financial system.

[Luno's Shariah compliance certificate for Ethereum staking service, issued by Amanie Advisors, image source: Luno]

This characteristic influences the cryptocurrency industry. Malaysia is the first country in the world to officially recognize cryptocurrencies as Shariah-compliant assets. The country has approved 15 digital assets as Shariah-compliant, including Bitcoin. All recognized digital asset market operators in Malaysia must maintain Shariah compliance. Local exchanges Luno and Hata adhere to these requirements.

Malaysian regulators believe that cryptocurrencies may be more Shariah-compliant than traditional finance. The traditional banking system provides loans based on deposits and charges interest, which may violate the Islamic prohibition on riba (interest). The operational structure of cryptocurrencies involves compensation for actual work, such as network maintenance and transaction validation. Bitcoin mining is viewed as legitimate compensation for computational verification work. Ethereum staking rewards contribute to network validation. These differ fundamentally from interest income.

[Image source: Halogen Capital]

Various Shariah-compliant cryptocurrency products have emerged. Halogen Capital operates as the world's first Shariah-compliant cryptocurrency mutual fund management company, managing approximately $75 million in assets. The company offers Shariah-compliant Bitcoin funds, Ethereum funds, and other products.

Nawa Finance operates as a Shariah-compliant DeFi protocol. The company collaborates with Solv Protocol to provide Shariah-compliant Bitcoin DeFi products. These products have received Shariah certification from Amanie Advisors, which is officially registered with the SC as a Shariah advisor. These products offer secure and transparent halal income structures. Nawa Finance's Total Value Locked (TVL) has exceeded $50 million, showcasing significant achievements in the Shariah-compliant DeFi space.

[Sharlife's zakat payment receipt, image source: Sharlife]

Sharlife has demonstrated innovation in the Islamic charity system. The platform supports zakat payments using cryptocurrencies. Sharlife collaborates with the Federal Territory Islamic Religious Council (MAIWP) to build a digital charity system.

However, practical limitations exist. Cryptocurrencies have not yet been recognized as an official payment method in Malaysia, limiting real-world applications. The federal system also poses challenges for nationwide institutionalization.

Malaysia's global expansion potential remains highly regarded. The expertise and experience accumulated in Islamic finance are competitive assets in overseas markets. Malaysia leverages this expertise to develop Shariah-compliant cryptocurrency products. The country has previously extended the institutional and product models of the Islamic bond market to the Middle East and Southeast Asia based on local successes. This indicates that cryptocurrencies may also have similar expansion paths. Major Muslim countries like Saudi Arabia and Indonesia may adopt Malaysia's Shariah-compliant digital asset model. Malaysia has sufficient potential to lead the global digital transformation in this field.

4.5. Mainnet Environment

[Image source: Solana Superteam MY]

Malaysia's blockchain mainnet environment remains limited. In the global mainnet landscape, Solana Superteam is almost the only active presence from Malaysia. Superteam collaborates with various Solana-based Malaysian projects, such as Jupiter and Meteora, focusing on supporting local builders and founders to expand the ecosystem. The organization actively runs community-centered activities, including hackathons, to achieve this goal. Ethereum KL, an Ethereum community, also operates locally but with limited activities.

[MYBW2025 IOTA keynote session, image source: IOTA]

IOTA is an exception. The project participated as an official sponsor of the 2025 Malaysia Blockchain Week (MYBW 2025). IOTA has conducted active marketing activities locally. The company has received Shariah compliance certification from the Cambridge Islamic Finance Academy (Cambridge IFA). Subsequently, IOTA has strengthened its branding targeting the Islamic finance market and accelerated its market strategy in Malaysia.

[Image source: Zetrix]

Meanwhile, the Malaysian government's strategic focus is on developing its own blockchain infrastructure rather than simply adopting global public chains. The government aims to create a regulatory-friendly, controllable, and locally-centered blockchain ecosystem. They are achieving this by collaborating with the local mainnet project Zetrix to develop the national blockchain infrastructure 'MBI'. This indicates a policy direction. The government aims to establish a stable and sustainable, state-led blockchain infrastructure rather than relying on external chains.

4.6. Bitcoin Mining

Malaysia ranks among the top ten globally in Bitcoin mining hash power. Large mining facilities are concentrated in the Sarawak and Sabah regions of Borneo. The operations of these facilities are based on extensive hydropower infrastructure. The power supply in these areas exceeds demand. Bitcoin mining actively utilizes this surplus electricity.

The large hydropower plants in Sarawak produce electricity that exceeds the region's demand. This surplus electricity is expected to be exported to Singapore and other countries in the future. Before the completion of submarine cable infrastructure, the mining industry prioritizes utilizing this electricity. Local governments collaborate with mining companies. Cheap electricity drives rapid growth in the mining industry, providing a stable alternative in a turbulent global mining environment. China's mining ban has contributed to this instability.

[Malaysian police crushing Bitcoin mining machines, image source: The Malaysian Reserve]

However, illegal mining poses a serious problem. According to data from the Malaysian Blockchain Association ACCESS, the national utility company Tenaga Nasional Berhad (TNB) reported electricity losses of approximately 441 million ringgit ($100 million) due to illegal mining. Cases of electricity theft are frequent, with some incidents leading to fires. Recent events include identity theft for fraudulent electricity contracts. In response, authorities have intensified their crackdown, seizing 985 illegal mining devices.

Malaysia's mining industry shows growth potential based on abundant renewable energy and institutional acceptance. However, the industry also faces social costs and regulatory issues arising from illegal mining. This indicates that while Malaysia is rising as a global Bitcoin mining center, it also carries challenges that need to be addressed.

5. Malaysia's Cryptocurrency Market: Opportunities and Challenges

5.1. Challenge Factors
Malaysia's population is multilingual, which can provide communication advantages. However, projects face complexities when entering the market. They must tailor strategies according to different target groups, creating barriers to entry.

For example, there are significant differences between ethnic Chinese Malaysians and non-Chinese Malaysians. They use different languages, community channels, and investment preferences. Shariah influences the majority Malay population, which exhibits a relatively passive attitude towards financial investments. Ethnic Chinese Malaysians actively engage in local and international stock investments. They also actively use global cryptocurrency exchanges and derivatives on on-chain trading platforms like Hyperliquid. The market segmentation is evident. A one-size-fits-all strategy cannot effectively address this structure.

Malaysia's Web3 industry faces limitations based on its developer talent pool. While Malaysia has many capable entrepreneurs, the developer talent pool remains relatively limited compared to neighboring countries like Vietnam and Indonesia. Top talent often flows to Singapore and other external regions, establishing companies or continuing careers outside Malaysia. This creates structural issues. Malaysia has cultivated world-class talent, yet the local Web3 ecosystem itself faces structural constraints that hinder its vibrancy. This poses significant challenges for the development of the local market.

5.2. Opportunity Factors
Despite these challenges, Malaysia's cryptocurrency market retains significant potential. The market shows particular advantages in talent-based networks. Projects like Coingecko and Etherscan originated in Malaysia and gained global influence. Malaysian talent also plays key roles in various global projects, including Meteora, Drift, and Pendle. These individuals form tight-knit networks throughout the global cryptocurrency industry, creating an environment for sharing opportunities and collaboration.

These networks show potential as a foundation for the development of Malaysia's local ecosystem. Recently, an increasing number of talents who established careers abroad are returning to Malaysia. Low living costs and stable living conditions drive this trend. These returnees inject new vitality into the ecosystem through connections with local communities. Opportunities for knowledge sharing and collaboration with the next generation are also expanding.

[Image source: Asia Pacific University Blockchain Club (APUBCC, left), Sunway Blockchain Club (SBC, right)]

Major universities, including Asia Pacific University (APU), Sunway University, and Taylor's University, actively engage in blockchain-related academic activities. This ensures a continuous influx of the next generation of Web3 talent. If government-level policy support aligns with these trends, Malaysia's Web3 ecosystem could grow at a faster pace.

[Binance Sharia Earn, image source: Binance]

Malaysia serves as an Islamic finance center. The market is assessed to have unique opportunities in Shariah-compliant digital assets. Islamic finance currently occupies a small portion of the cryptocurrency market. However, related demand shows signs of gradual expansion. Binance's recent launch of Shariah-compliant products exemplifies this trend. Malaysia has institutionalized various Shariah-compliant products in traditional finance. The country possesses the institutional foundation and practical experience needed to extend this trend to digital assets. This makes Malaysia particularly noteworthy.

This foundation is not limited to the local ecosystem. There is global demand for Shariah-compliant products, particularly concentrated in the Middle East. The potential for connections with these markets indicates that Malaysia is well-positioned. In the future, Malaysia could develop into a global Islamic digital asset center.