Malaysia's Crypto Ecosystem 2025: The Hidden Power Behind Global Web3 Giants

This report, written by Tiger Research, analyzes how the Malaysian builder community has emerged as a hidden force behind global Web3 leaders. We would like to thank Lydian Labs , the organizer of MYBW 2025, for their support of this research.

Opinion of Figures

1. Introduction

Tiger Research positioned itself as the official research partner for Malaysia Blockchain Week, the country's premier blockchain event, organized by Lydian Labs . A notable feature of the event was the active participation of regulatory authorities, who had previously been conservative towards the crypto industry but are now engaging in constructive discussions for its development.

The government's involvement signals that the Malaysian crypto ecosystem is moving towards institutional acceptance. The event connected diverse industry participants and expanded communication channels between the government and the private sector. Tiger Research conducted interviews with officials, experts, and local teams during the event. These conversations provided firsthand insights that informed the analysis in this report.

2. Malaysian Crypto Market: Three Keywords You Need to Know

The Malaysian crypto market has three key characteristics: the meeting point of Southeast Asia, the birthplace of global champions , and the world's Islamic financial center.

Malaysia is a multilingual country, with a population fluent in Malay, English, Mandarin, and Tamil. This diversity creates a natural integration of East and West cultures. Malaysia also enjoys a strategic location. From Kuala Lumpur, major Southeast Asian cities like Ho Chi Minh City, Bangkok, and Jakarta are within a two-hour flight. This accessibility fosters cross-cultural collaboration and accelerates business expansion.

This environment has produced talent with a global perspective. Beyond language skills, Malaysians naturally develop cross-cultural understanding. Despite the relatively small domestic market size, several major crypto projects have originated in Malaysia. Etherscan, Jupiter, Virtuals Protocol, and CoinGecko were all born in Malaysia and now have a global reach.

The integration of Islamic finance in Malaysia creates unique opportunities. Malaysia hosts the world's largest Islamic financial center, making Sharia compliance a requirement for crypto businesses. This requirement encourages innovation, not hinders it. Malaysia was the first country to recognize crypto as Sharia-compliant, launching a Sharia-compliant Bitcoin fund, and allowing zakat payments using crypto. These developments connect crypto to the global Islamic finance market, which is projected to reach $10 trillion by 2030.

3. Timeline of Crypto Regulation in Malaysia

Phase 1: Building a Digital Asset Regulatory Framework (2019–2020)

Malaysia is one of the Asian countries that has been quick to develop a regulatory framework for digital assets. In 2019, the Capital Markets and Services ( Prescription of Securities ) ( Digital Currency and Digital Token ) Order 2019 was issued, which classifies digital assets into two categories: Digital Currency and Digital Token. Assets that meet certain criteria are classified as securities and are under the supervision of the Securities Commission Malaysia (SC).

The SC subsequently revised its guidelines for Recognized Markets , requiring digital asset exchanges (DAX) to register as Recognized Market Operators ( RMOs). Exchanges are required to meet stringent requirements, including a minimum paid-up capital of RM5 million (approximately USD 1.25 million), stringent governance standards, and registration and domicile in Malaysia. These measures strengthen exchange stability and investor protection. The Regulated Entity Types are:

• DAX ( Digital Asset Exchange ) Operators : Provide spot crypto asset trading services through an order book system or broker model.

• IEO ( Initial Exchange Offering ) Operator: Manages token issuance and investor recruitment platform in a regulated environment.

• DAC ( Digital Asset Custodian ): Provides crypto custodian and management services for institutional and retail investors.

In 2020, Malaysia issued more detailed operational guidelines, strengthening the regulatory framework. IEOs and DACs are classified as separate business categories, each required to register as an RMO. This creates tailored regulatory standards based on the characteristics of each business.

By 2025, there will be 12 companies operating as digital asset RMOs: 6 crypto exchanges, 4 custodial service providers, and 2 IEO platforms.

Phase 2: Strengthening Enforcement and Blocking Foreign Exchanges for Investor Protection (2021–2024)

Once the regulatory framework is established, the SC enhances enforcement through active market control. The SC not only creates rules but also actively blocks illegal elements to strengthen the credibility and security of the regulatory ecosystem. The SC has two primary objectives: maintaining regulatory consistency by blocking unregistered foreign exchanges operating illegally in Malaysia and protecting investors from losses incurred by unauthorized platforms.

The SC created an " Investor Alert List " to warn users. The list includes global exchanges like Binance and Bybit, along with a warning that trading through these platforms is not protected by Malaysian law.

Starting in 2021, the SC shifted from a passive approach to direct and decisive law enforcement. In July of the same year, the SC ordered Binance to cease services to Malaysian users within 14 days and shut down all channels, including its website. Following the global crypto crisis in 2022, such as the bankruptcy of FTX and the collapse of Terra Luna, Malaysia tightened its regulatory approach. The SC noted that these incidents occurred in an unregulated environment and imposed similar measures against unauthorized exchanges like Huobi and Bybit.

These actions go beyond formal sanctions. Regulators also implement strategies of total blocking and exclusion from the market, such as: Working with ISPs to block illegal exchange websites, requiring the Google Play Store and Apple App Store to remove these exchange apps, central banks and tax authorities ordering local banks to block transactions to/from illegal platforms, and individual users found using P2P or illegal exchanges are subject to sanctions such as: bank account blocking, restricted access to financial products, and early withdrawal of car loans and mortgages.

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

The Malaysian crypto market boomed following the election of Donald Trump as US President. Prime Minister Anwar Ibrahim initiated crypto discussions with former Thai Prime Minister Thaksin in January 2025, and then met with Binance founder Changpeng Zhao (CZ) in April to discuss developing Malaysia as a digital asset hub. These moves demonstrate Malaysia's desire to lead digital financial policy in Southeast Asia as it chairs ASEAN. Malaysia's Web3 market grew significantly compared to the previous year, marking a significant turning point since the US election.

The government's political commitment quickly translated into concrete policy changes. In June 2025, Prime Minister Anwar launched the " Digital Asset Innovation Hub ," led by Bank Negara Malaysia (BNM), as a regulatory sandbox. This sandbox serves as a safe space for digital asset trials and innovation. Digital Minister Gobind Singh Deo announced the formation of a " Digital Asset and Blockchain Working Committee " at a blockchain industry roundtable hosted by MDEC, underscoring the government's systematic approach.

Technical infrastructure development is also being accelerated. Minister of Science, Technology, and Innovation, Chang Lih Kang, announced the official launch of the Malaysia Blockchain Infrastructure (MBI) at the opening of Malaysia Blockchain Week 2025. This infrastructure is being developed jointly by MIMOS and local mainnet project Zetrix , with the aim of leveraging blockchain in government transparency, halal certification, and trade and supply chain efficiency.

The most striking change was the loosening of regulations by the SC. In June 2025, the SC released a Consultation Paper , marking a shift from a strictly approval-based review system to significant deregulation. By July 2025, only 23 cryptocurrencies that passed SC review would be able to be traded on local exchanges. However, under the new framework, exchanges can make their own listing decisions, provided they meet specified criteria, without requiring prior approval from the SC . However, this deregulation does not mean total freedom. The regulator also increased exchange capital requirements, encouraged a self -regulatory model , and maintained restrictions on high-risk assets such as privacy coins, meme coins, and certain stablecoins.

This approach seeks to balance market freedom and financial system stability. Ultimately, this policy shift demonstrates Malaysia's strategy to compete with Singapore and Hong Kong as a major Web 3 hub in the Asia-Pacific. In conjunction with the Trump administration's pro-crypto policies, Malaysia is positioning itself as a crucial bridge between Western capital and Asian markets.

4. Sector Exploration: Malaysia's Crypto & Blockchain Ecosystem

4.1. Centralized Exchanges (CEX)

Malaysia has six recognized local crypto exchanges. Luno dominates with over 90% of local trading volume, creating a win-win situation similar to other Asian countries like Korea and Thailand. However, newcomers like Hata , which launched last year, are showing rapid growth and are starting to inject new energy into the market. Sinegy is also a major player, providing crypto trading services to corporations and institutional investors.

Local exchanges have limited real-world influence. Despite regulatory efforts to block unregistered foreign exchanges like Binance, many investors remain active using global platforms through indirect methods. Approximately 40–60% of Malaysia's total spot crypto trading volume is estimated to occur on global exchanges like Binance and Bybit.

The small size of the local crypto market also poses a challenge. Although Luno controls over 90% of the local market, its trading volume remains limited. Luno's daily trading volume shows a 200-fold gap compared to Upbit in Korea. According to BNM's 2024 annual report , the total net outflow of deposits to DAX-listed exchanges was less than 1% of total national banking deposits by the end of 2024, and only about 0.4% of the market capitalization of securities listed on Bursa Malaysia.

Investors appear to be choosing global exchanges due to the structural limitations of local exchanges. Direct SC involvement in crypto listings requires a rigorous approval process, limiting the choice to just 23 tradable cryptocurrencies . Low liquidity makes large-scale trading difficult. The lack of margin trading or derivatives also reduces investor appeal.

In this environment, local exchanges are pursuing a survival strategy by operating parallel brokerage businesses. They provide OTC services and stablecoin on/off-ramps outside of their exchange offerings. This strategy targets family offices and digital nomads as an additional source of income. This business model arises from restrictions on major stablecoins like USDT and USDC on local exchanges, as well as low liquidity for large transactions.

Malaysia's crypto tax policy also influences user choices. Crypto profits are subject to income tax, not capital gains tax. The government only taxes the amount withdrawn. For example, if someone holds 10 BTC but only withdraws 1 BTC locally, tax is only levied on the withdrawal amount. Airdrops , staking , and DeFi earnings are also subject to income tax . The government monitors crypto activity through trading data from local exchanges. Smuggling and underreporting of activity can result in investigations and sanctions. This tracking system is a major factor deterring investors from using local exchanges.

4.2. Stablecoin

Malaysian regulators have a conservative stance on stablecoins . Dollar-backed stablecoins like USDC and USDT remain unlisted on local exchanges. While BNM has not issued an explicit statement, this cautious approach is likely influenced by policy priorities established after the 1998 Asian financial crisis, when rapid capital outflows caused serious economic disruption. This incident heightened concerns about exchange rate stability and foreign exchange management.

The SC's recent consultation paper shows that this cautious approach persists. Regulators view stablecoins as vulnerable to market price volatility and potentially endangering the stability of the local financial system. Rather than being considered a regular means of payment, they are viewed as a potential macroeconomic risk.

Nevertheless, private sector stablecoin experiments continue. Blox is developing 'MYRC,' a stablecoin pegged to the ringgit. MYRC is a fiat-backed stablecoin (ringgit) that runs on the Arbitrum and Ethereum networks. Users can mint MYRC via local bank account deposits through the Blox platform and exchange it in the same way. MYRC is currently in beta with a market capitalization of around USD 700,000, still limited but quite actively traded.

However, overlapping regulations have caused project delays. Dual oversight by the SC and BNM has created unclear responsibilities and standards. Blox has been working on the project for three years, communicating with regulators, but has yet to receive final approval due to unclear regulatory positions. The lack of a consistent stablecoin regulatory framework is a major factor in the approval delay.

Signs of change are emerging. Prime Minister Anwar Ibrahim recently announced consideration of a regulatory sandbox through the " Digital Asset Innovation Hub ," including a ringgit-based stablecoin experiment . This central bank-led sandbox will provide a controlled environment for fintech and digital asset companies to test new technologies and services.

However, given government concerns about capital controls, the initial focus is likely to be on applications within the local financial ecosystem, rather than cross-border payments . Examples include 24-hour payment infrastructure (outside of bank operating hours), escrow services that can utilize conditional payment functions, such as for prepaid refunds for closed fitness centers or uncertain home renovation contracts. Implementing " programmable money " could be a solution to everyday financial problems.

4.3. NFT Community

The Malaysian NFT market remains in a downturn. Many users who jumped in during the NFT hype and high prices have suffered losses and exited the market. This pattern is similar to other countries. While there are local collectors for global projects like BAYC, Azuki, and Milady, their activity is generally limited to small hobbyist gatherings. Malaysia has yet to see a major NFT project grow locally.

Pudgy Penguins is an exception. This community is building a self-sustaining ecosystem in Malaysia that goes beyond simply a network of NFT holders. Its open operating approach and inclusive culture are key to its success. The community welcomes anyone to participate, with no requirement for NFT ownership. The barrier to entry is very low for newcomers.

Community members connect naturally with each other across diverse backgrounds. These relationships are formed purely on the basis of enjoyment and positive vibes, not just the exchange of information. They regularly host offline events like wine tastings, go-karting, and pickleball , and hold monthly meetings even during slow market times. They are also actively involved in the external community, collaborating through networking and referrals when requested.

The community is preparing “MY PENGU ACADEMY”, an educational onboarding program for Web3 beginners, to expand the community and diversify participation.

Meanwhile, local exchange Hata lists Pudgy's related memecoin, $PENGU, on its global ( offshore- only) platform. Some members of the Malaysian community trade it indirectly. Given local memecoin trading restrictions, this structure also serves as a motivator for community participation.

The Malaysian NFT market relies more on community-based activities than trading. Pudgy Penguins is the most organized and scalable example. In such a small market, offline networks are crucial. Pudgy Penguins' operational approach provides important insights in this context.

4.4. Islamic Finance

Malaysia has positioned itself as Asia's largest Islamic finance hub. The country ranks first globally in the sukuk (Islamic bond) market. This is supported by its predominantly Muslim population (over 60%). By 2024, Islamic finance will comprise approximately 47% of the national financial system.

These characteristics have also shaped the crypto industry. Malaysia became the first country to recognize crypto as a Sharia-compliant asset. To date, 15 digital assets have been approved as Sharia- compliant , including Bitcoin. All recognized digital asset market operators in Malaysia must comply with Sharia. Local exchanges Luno and Hata both adhere to this requirement.

Malaysian regulators view cryptocurrency as more Sharia-compliant than traditional banking . Conventional banking systems provide deposit-based loans and charge interest, potentially violating the prohibition on usury (riba) under Sharia. Cryptocurrency, on the other hand, operates within a framework that compensates for real work, such as network maintenance and transaction verification. Bitcoin mining is considered legitimate compensation for computational work, and Ethereum staking, as a reward for contributing to network validation, differs fundamentally from interest income.

Various Islamic finance-based crypto products have emerged, such as Halogen Capital, the world's first Sharia-compliant crypto mutual fund manager, managing approximately USD 75 million in various products such as Sharia-compliant Bitcoin funds, Ethereum funds, and others.

Nawa Finance is a Sharia-compliant DeFi protocol. They partner with Solv Protocol to offer a Sharia-compliant Bitcoin DeFi product, certified by Amanie Advisors (a registered Sharia advisor in SC). This product offers a secure and transparent halal income structure. Nawa Finance has surpassed USD 50 million TVL, demonstrating significant progress in Sharia-compliant DeFi.

Sharlife shows innovation in the Islamic charity system. This platform allows zakat payments using crypto, collaborating with MAIWP (Federal Region Islamic Religious Council) to build a digital charity system.

There are also practical obstacles. Crypto is still not recognized as an official payment method, limiting its real-world applications. The federal system presents challenges to institutionalization nationwide.

However, the potential for global expansion remains high. Expertise in Islamic finance and local experience are competitive assets in overseas markets. Malaysia has previously expanded its sukuk market model and institutions to the Middle East and Southeast Asia. This suggests a similar expansion path for crypto; major Muslim countries like Saudi Arabia and Indonesia may adopt Malaysia's Sharia-compliant digital asset model. Malaysia has considerable potential to lead the global digital transformation in this sector.

4.5. Mainnet Environment

The blockchain mainnet scene in Malaysia remains limited. Among global mainnets, the Solana Superteam is the only one actively present in Malaysia. The Superteam collaborates with various local Solana-based projects, such as Jupiter and Meteora, focusing on supporting local builders and founders to expand the ecosystem. The organization also actively organizes community activities such as hackathons. Ethereum communities like Ethereum KL also exist, but with limited activity.

IOTA is an exception. The project became an official sponsor of MYBW 2025 and conducted active marketing activities locally. IOTA obtained Sharia compliance certification from Cambridge IFA and strengthened its branding targeting the Islamic finance market. The company is accelerating its market strategy in Malaysia.

Meanwhile, the Malaysian government is focusing more on developing its own blockchain infrastructure, rather than simply adopting global public chains. This effort is being achieved by creating a local blockchain ecosystem that is regulatory-friendly and manageable. Through the MBI national blockchain infrastructure and the local Zetrix mainnet project, the government is affirming its policy direction to establish a stable and sustainable blockchain infrastructure under national leadership, rather than relying on external chains.

4.6. Bitcoin Mining

Malaysia ranks among the top 10 global Bitcoin mining countries by hashrate. Large-scale mining facilities are centered in Sarawak and Sabah (Borneo), with operations leveraging extensive hydroelectric power infrastructure. Both regions have a surplus of electricity supply relative to demand. Bitcoin mining actively exploits this excess electricity.

Sarawak's large hydroelectric power plant produces electricity exceeding regional demand. This surplus is planned for future export to Singapore and other countries. While awaiting the construction of a submarine cable , the mining industry is prioritizing the utilization of this energy. The local government is collaborating with mining companies. Low electricity costs are driving rapid growth in the mining industry, providing a stable alternative amidst the volatile global mining environment caused by China's mining ban.

However, illegal mining has become a serious problem. According to Malaysian blockchain association ACCESS , state utility TNB reported losses of approximately RM441 million (USD100 million) due to illegal mining. Electricity theft is common, with some causing fires. Recent incidents include identity theft for fraudulent electricity contracts. Authorities are tightening their crackdown, confiscating 985 illegal mining devices.

Malaysia's mining industry shows strong growth potential, supported by renewable energy and institutional acceptance. However, the industry also faces social costs and regulatory issues due to illegal mining—a factor that has contributed to Malaysia's emergence as a global hub for bitcoin mining, while also presenting challenges that need to be addressed.

5. Malaysian Crypto Market: Opportunities and Challenges

5.1. Challenge Factors

Malaysia has a multilingual population, speaking multiple languages. This can provide advantages in communication. However, for crypto projects looking to enter the market, this creates complexities. They must tailor their strategies based on different target groups. This creates barriers to entry for new players.

For example, there are stark differences between the ethnic Chinese and non-Chinese communities in Malaysia. They speak different languages, engage in different community channels, and have different investment preferences. Sharia law influences the majority of ethnic Malays, who tend to have a passive attitude towards financial investments. In contrast, the Chinese community actively invests in local and international stock markets. They also use derivative products on global crypto exchanges and on-chain platforms like Hyperliquid. The market is segmented into distinct segments. A single approach will be ineffective in addressing this structure.

Malaysia's Web3 industry also faces a shortage of developer talent. While Malaysia boasts a wealth of talented entrepreneurs, the number of Web3 developers remains relatively small, especially compared to neighboring countries like Vietnam and Indonesia. Many top talent choose to relocate to Singapore or other countries to build companies or further their careers. This creates a structural problem: Malaysia struggles to retain and develop talent within its domestic ecosystem. While Malaysia produces global-standard talent, its local Web3 ecosystem is structurally limited, hampering its activation and growth. This is a major challenge to the development of the local crypto market.

5.2. Opportunity Factors

Despite the challenges, the Malaysian crypto market still holds significant potential. One of its key strengths lies in its global talent network. Prominent projects like Coingecko and Etherscan originated in Malaysia and now have global influence. Malaysian talent also plays a crucial role in various global projects, including Meteora, Drift, and Pendle. They form a close network across the global crypto industry. This network creates a collaborative ecosystem where opportunities can be shared and leveraged.

This talent network has the potential to become the foundation for developing a local ecosystem. Recently, a growing number of talented individuals who built careers abroad have begun returning to Malaysia. Factors such as the low cost of living and stable living conditions are driving this trend. Their return brings new energy to the local ecosystem through connections and contributions to the community. Opportunities to share knowledge and collaborate with the next generation are also increasing.

Several renowned universities, such as Asia Pacific University (APU) , Sunway University , and Taylor's University, are also actively engaged in blockchain-related academic activities. This ensures a continuous flow of next-generation Web3 talent. If this trend is accompanied by government policy support, Malaysia's Web3 ecosystem could grow even faster.

Malaysia is also known as a hub for Islamic finance. In this context, the Malaysian market offers a unique opportunity to develop Sharia-compliant digital assets. Currently, Islamic finance only accounts for a small portion of the global crypto market. However, demand for Sharia-compliant products shows signs of growth. Binance's recent launch of Sharia-compliant products reinforces this trend. Malaysia has institutional and operational experience in developing Sharia-compliant products in traditional finance—this foundation can be extended to digital assets.

This potential is not limited to the domestic ecosystem. Demand for Sharia-compliant products is global, particularly in the Middle East. Potential connections with these markets demonstrate Malaysia's strategic position. Going forward, Malaysia has the opportunity to develop into a global hub for Sharia-compliant digital assets.

🐯 More from Tiger Research

 Telusuri lebih lanjut laporan yang relevan dengan topik ini:

• [Special Report] Vietnam Crypto Market 2025: Complete Analysis of 21 Million Investors

• [Special Report] Korea Web3 Market Guide

• [Special Report] Tiger Research Asia Insights: 2024 Review & 2025 Outlook

Disclaimer

This report is based on materials believed to be reliable. However, we make no warranty, express or implied, as to the accuracy, completeness, or suitability of the information presented. We are not responsible for any loss or damage arising from the use of this report or its contents. The conclusions and recommendations contained in this report are based on information available at the time of writing and are subject to change without notice. All projects, estimates, projections, objectives, opinions, and views expressed are tentative and subject to change without notice, and may differ or conflict with the views of other parties or organizations.

This document is prepared solely for informational purposes and does not constitute legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and should not be construed as an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or prospective investors.

Terms of Use

Tiger Research permits fair use of reports it has compiled and published. 'Fair use' is a principle that permits the use of portions of content for the public interest, as long as it does not harm the commercial value of the material. If the use complies with this principle, reports may be used without prior permission. However, when citing Tiger Research reports, you are required to:

1. Clearly cite 'Tiger Research' as the source.

2. Includes Tiger Research logo (black/white).

If the material is to be re-compiled and republished, separate approval is required. Unauthorized use of the report may result in legal action.