Can Malaysia’s Crypto Listing Reform Accelerate Market Growth Without Heightening Risk?

Malaysia’s Securities Commission (SC) has unveiled sweeping proposals to allow certain cryptocurrencies to be listed on digital asset exchanges without prior regulatory approval, provided they meet strict eligibility criteria.

This move is designed to accelerate the time-to-market for new tokens, enhance operator accountability, and expand product offerings for both retail and institutional investors.

Under the proposed framework, exchanges would be held directly responsible for vetting and monitoring listed assets. Eligible tokens must have passed security audits with publicly available results and must have been traded for at least one year on a platform compliant with Financial Action Task Force anti-money laundering standards. The SC’s public consultation on these reforms runs until August 11, 2025.

Investor Protection Remains Central to Regulatory Strategy

While the reforms promise faster listings, the SC is also introducing stricter governance and operational requirements for exchanges. Operators will be required to segregate client assets, implement robust risk management systems, and meet higher financial thresholds to ensure operational resilience. These measures are intended to prevent misuse of funds, bolster trust, and reinforce the overall stability of Malaysia’s digital asset sector.

The regulator’s approach reflects lessons learned from recent enforcement actions against unlicensed exchanges, such as Bybit and Huobi, which were ordered to cease operations for failing to comply with local rules. By tightening oversight, the SC aims to maintain market integrity while allowing for greater innovation.

Did you know?
Malaysia introduced its first digital asset exchange framework in 2019, laying the foundation for today’s robust market. The rapid growth since then has prompted the regulator to revisit and modernize its approach, with the current consultation marking the most significant update to crypto oversight in years.

High-Risk Assets Prompt Calls for Caution

The SC is seeking industry and public input on whether certain high-risk assets, such as privacy coins like Monero and volatile memecoins, should be permitted for trading.

Privacy coins are under scrutiny due to their potential use in illicit activities, while memecoins and nascent utility tokens raise concerns about heightened volatility and low market demand.

The regulator’s cautious stance on these assets underscores its commitment to balancing innovation with the need for effective risk controls.

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Market Growth Fuels Regulatory Evolution

Malaysia’s digital asset market has experienced explosive growth, with trading volumes reaching a record 13.9 billion ringgit in 2024, more than doubling from the previous year.

This surge has been driven by increased participation from both retail and institutional investors, as well as growing interest from traditional capital market intermediaries seeking exposure to crypto assets.

The proposed reforms are part of the SC’s broader strategy to keep pace with global trends, support market expansion, and ensure that Malaysia remains competitive as a digital asset hub in Southeast Asia.

Stricter Governance and Higher Standards Set for Exchanges

In addition to faster listings, the SC is raising the bar for exchange operators. Requirements include the segregation of user assets, designation of a senior management member residing in Malaysia to oversee wallet administration, and mandatory registration as a digital asset custodian or engagement with a registered custodian.

Enhanced operational controls and capital requirements are designed to ensure that exchanges can withstand market shocks and fulfill obligations to clients, further strengthening investor confidence.