Malaysia charts 3-year path to boost asset tokenization

Malaysia’s central bank has launched a new roadmap exploring the tokenization of real-world financial assets over the next three years. The roadmap, which is now open for public feedback, prioritizes monetary stability and economic growth.

The Bank Negara Malaysia (BNM) recently published a discussion paper on asset tokenization, which aims “to co-create a safe and sustainable roadmap for the development of tokenised financial services in Malaysia.”

BNM notes that Malaysia must not lag behind in the rising tokenization wave, which some studies project could unlock a $23 trillion opportunity by 2033.

“…BNM sees strong value in accelerating tokenisation exploration to ensure Malaysia’s financial sector remains competitive and efficient. Moreover, tokenisation presents an opportunity to advance national priorities by enabling innovative new solutions in support of sustainability, Islamic finance and digital economy objectives,” the paper states.

While it supports tokenization, the top bank clarified that it does not endorse decentralized digital assets.

The roadmap sets a clear objective: promoting responsible innovation in tokenization that delivers tangible, real-world economic benefits. This can only be achieved through a co-creation approach involving key financial industry stakeholders, the bank says. Additionally, any innovation must uphold monetary stability and financial integrity.

BNM’s phased approach

Malaysia will take a phased approach in its tokenization journey. Earlier this year, the government set up the Digital Asset Innovation Hub to accelerate the adoption of blockchain technology and the integration of digital assets in the country’s financial sector.

The Hub will host collaborations between participants exploring tokenization, with the Asset Tokenisation Industry Working Group spearheading the project. The group was established in May to explore use cases, facilitate capacity building, and monitor potential risks and regulatory gaps.

In the second phase, set to start next year, the participants are expected to commence their live pilots and proofs of concept in a controlled environment. These tests will continue in 2027, with their findings set to guide the next steps.

Source: BNM.

BNM identified supply chain financing, treasury and liquidity management, sustainable finance, programmable payments, and a more efficient Islamic financial system as the most high-potential tokenization use cases. It also singled out cross-border payments as a sector that could benefit from tokenized payments as they would “support liquidity, reduce settlement delays and enhance efficiency in trade transactions.”

The top bank will remain technology-agnostic and encourages participants to explore both decentralized blockchains and permissioned ledgers in their applications. The decision should be guided by specific use cases, but the underlying technology must deliver resilience, interoperability, inclusivity, and adaptability.

Where participants deploy applications on public blockchains, they must build permissioned access atop the public network, the bank advises.

However, BNM noted that permissioned frameworks would remain the preferred option. This is especially critical in the enforcement of due diligence practices, such as Know Your Customer (KYC) and anti-money laundering (AML).

“While some blockchain-based systems offer transaction traceability, relying solely on ex-post detection and tracing may present certain challenges, particularly where identity masking, token mixers or cross-border transactions may hinder effective enforcement,” it said.

Digital Ministry doubles down on blockchain, tokenization

The ministry is also pushing tokenization along with other government agencies, including the BNM and the Securities Commission.

“The application of blockchain technology through tokenisation will also be studied, particularly in asset management and capital market development, to ensure transaction security and the stability of the digital ecosystem,” the minister said.

The Digital Ministry has established a National Blockchain Policy Task Force to guide its implementation of the roadmap, Deo added. The task force consists of industry experts, academics, policymakers and government officials from relevant ministries.

“In addition, among the key strategies being considered in ensuring the local workforce is ready in the blockchain field are to empower higher education institutions, strengthen workforce readiness and industry matchmaking,” he added.

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