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Bank Negara Malaysia (BNM), the country's central bank, has released its 2024 annual report, outlining its stance on digital assets. The report reveals a keen interest in the potential of asset tokenization to enhance the efficiency of the financial system, while also emphasizing a cautious approach towards cryptocurrencies.
The central bank's report indicates that the Malaysian crypto market, while active, remains relatively small compared to the overall domestic financial market. According to BNM, cryptoassets represent less than 1% of total banking system deposits and around 0.4% of the market capitalization of securities listed on Bursa Malaysia as of end-2024.
However, the report also acknowledges the growth in crypto trading activity within Malaysia. In 2024, the total trading volume of cryptoassets in the country increased to approximately RM13.9 billion ($3.143 billion) , a significant rise from RM5.4 billion in 2023.This reflects a growth of around 157%. The central bank also noted the expansion of the number of domestic cryptoasset players and the variety of services provided.
Despite the activity in the crypto market, BNM has clarified that cryptocurrencies will not be recognized as legal tender in the country. The central bank cites the high volatility of cryptoassets as a key reason for their unsuitability for use in payments, price setting, and as a reliable store of value.
Instead, Bank Negara Malaysia is focusing on exploring digital asset technologies, particularly asset tokenization. The central bank recognizes the potential of tokenization to drive efficiency in the financial system. The report highlights that asset tokenization within the regulated financial sector is "creating new opportunities by enabling programmability, composability, and atomicity."
BNM sees potential for tokenized deposits to complement wholesale Central Bank Digital Currencies (CBDCs) as a credible on-chain settlement asset. It believes that tokenized deposits, issued by regulated financial institutions, can offer the benefits of programmability and atomic settlement while maintaining trust in the existing financial system.
Looking ahead, Bank Negara Malaysia plans to further explore the potential of broader tokenization of real-world use cases for the financial sector. This exploration will involve collaboration with stakeholders such as the Securities Commission Malaysia and the private sector. To facilitate this, BNM aims to issue a discussion paper on asset tokenization in 2025, outlining high-level principles and use cases to guide industry participation in tokenization initiatives.
In 2024, there were 15 entities regulated by the Securities Commission Malaysia (SC), covering digital asset exchanges, custodians, initial exchange offering operators and cryptoasset funds, up from just five entities in 2019.
