Malaysia proposes significant revamp of crypto trading regulations

Malaysia proposes significant revamp of crypto trading regulations

Malaysia is pushing forward with a significant overhaul of its digital asset exchange (DAX) regulations, as announced by the Securities Commission Malaysia (SC) in July 2025. The proposed changes aim to bolster the regulatory framework, accelerate token listings, and enhance investor protection in response to rapid growth in digital asset trading.

The proposals, outlined in a consultation paper published on June 30, 2025, include several key enhancements. For instance, certain digital assets that meet minimum eligibility criteria could be listed on DAX platforms without requiring prior SC approval, reducing time-to-market and enabling exchanges to respond more swiftly to market demand.

DAX operators will also bear greater responsibility for ensuring compliance with legal and risk standards for listed assets. Mandatory segregation of client assets and more stringent requirements concerning client asset security will be introduced. Exchanges must implement policies to mitigate risks of loss or misuse of user funds and facilitate repayment in insolvency cases.

Furthermore, DAX operators will need to meet higher financial thresholds and designate senior management based in Malaysia responsible for wallet administration. Exchanges that custody user assets must register as digital asset custodians or engage SC-registered custodians to provide these services, enhancing market security and transparency.

The proposals come after a surge in the digital asset market, with 2024 trading volume hitting a record RM13.9 billion (approximately $2.9 billion), more than doubling the 2023 figure. The SC views DAX platforms as crucial for providing regulated, fair, and transparent market access to digital assets.

The consultation period runs from June 30 to August 11, 2025, and the SC is inviting public feedback from various industry stakeholders, including issuers, exchanges, financial institutions, and legal professionals. The feedback will inform the finalization of the updated DAX regulatory framework.

While the recent announcements focus on regulatory enhancements for licensed exchanges, Malaysia’s SC historically has taken enforcement actions against unlicensed digital asset platforms to protect investors and maintain market integrity. Though specific new enforcement actions have not been detailed in the latest updates, the stronger regulatory framework is expected to reinforce supervision and compliance, thereby indirectly curbing unlicensed operations.

The Malaysian digital asset sector has seen significant growth since the introduction of the DAX framework in 2019, with increased participation from retail investors, institutional investors, and traditional capital market intermediaries. The sector's growth has been driven by both direct investments and fund-based exposure.

In 2023, the Securities Commission ordered Huobi Global to cease operations in Malaysia for failing to register as a Recognised Market Operator (RMO). Similarly, Bybit and its CEO were ordered to cease operations in Malaysia for running an unlicensed digital asset platform in December 2021. These enforcement actions underscore the SC's commitment to maintaining a secure and transparent digital asset trading environment.

In summary, Malaysia is actively advancing its digital asset regulations to foster innovation while bolstering investor safeguards and market integrity. The proposed changes reflect a balanced approach to encourage growth but with heightened operational and financial standards for digital asset exchanges. The consultation period provides an opportunity for stakeholders to contribute to the development of a robust and responsive regulatory framework for the digital asset industry.

[1] Securities Commission Malaysia (SC), "Consultation Paper on Proposed Updates to Digital Asset Exchange (DAX) Regulations," June 30, 2025. [2] Bernama, "Malaysia Proposes Regulatory Overhaul for Digital Asset Exchanges," July 1, 2025. [3] The Edge Markets, "Malaysia's SC Proposes Changes to Digital Asset Exchange Regulations," July 2, 2025. [4] The Business Times, "Malaysia Strengthens Digital Asset Exchange Regulations," July 5, 2025. [5] The Malaysian Reserve, "SC Proposes Changes to Digital Asset Exchange Regulations," July 6, 2025.

1. The proposed updates to Digital Asset Exchange (DAX) regulations in Malaysia could allow certain digital assets to be listed without prior Securities Commission Malaysia (SC) approval, potentially reducing token listings' approval time and swiftly responding to market demand.
2. In addition, DAX operators will be required to meet higher financial thresholds, designate senior management based in Malaysia for wallet administration, and register as digital asset custodians or engage SC-registered custodians to provide custody services.
3. Furthermore, exchange operators will bear greater responsibility for ensuring compliance with legal and risk standards, implement policies for securing user funds, and segregate client assets to enhance market security and transparency in the crypto, finance, and business industries.

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