Overview of Shariah-Compliant Digital Assets
In July 2020, Malaysia's Securities Commission Shariah Advisory Council (SAC) approved investment and trading in digital currencies and tokens through registered Digital Asset Exchanges (DAXs) that meet Shariah requirements. This landmark decision acknowledged digital assets as Shariah-compliant instruments, reflecting the growing digitization of capital markets.
Key Requirements for Shariah-Compliant Digital Tokens:
- Usage of Proceeds: Token issuance funds must exclusively finance Shariah-compliant activities
- Token Benefits: All associated rights and benefits must align with Shariah principles
- Sukuk Proceeds Framework: Existing SAC resolutions on sukuk deployment apply to mixed-use tokens
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2023 Digital Asset Market Trends
The global digital asset market showed mixed performance in 2023:
First Half 2023 Challenges:
- Market contraction following FTX's 2022 collapse
- Reduced trading volumes across major exchanges
Q3 2023 Recovery:
- Malaysian DAXs saw 300%+ volume growth
- Bitcoin and Ethereum price surges drove activity
- Increased institutional interest in crypto ETFs
Regulatory Developments:
- SC intensified oversight of RMO-DAX operators
- Three Digital Asset Custodians (DACs) received preliminary approval
- Retail investors under 45 comprised 72% of market participants
Malaysia's Digital Asset Ecosystem
Current Market Infrastructure:
- 5 registered Digital Asset Exchanges
- 450,000 DAX accounts (2019-2020 period)
- 11 tradable tokens including new additions (AVAX, MATIC)
Permissible Digital Assets:
- Bitcoin (BTC)
- Ethereum (ETH)
- Ripple (XRP)
- Litecoin (LTC)
- Cardano (ADA)
- And 6 other approved tokens
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Market Innovation and Fundraising
Initial Exchange Offerings (IEOs):
- Two SC-registered IEO operators launched in 2022
- Maximum fundraising cap: RM100 million
- Combines benefits of ICOs with regulatory oversight
Digital Asset Custodians (DACs):
- Provide secure storage solutions
- Protect investor assets during fundraising
- Utilize advanced cybersecurity measures
Frequently Asked Questions
What makes a digital asset Shariah-compliant?
Digital assets must meet SAC requirements including proper use of funds, Shariah-aligned benefits, and compliance with existing sukuk frameworks.
How has Malaysia regulated digital assets?
The SC issued Digital Asset Guidelines in 2020 requiring registration for all digital asset offerings, with strict oversight of exchanges and custodians.
What percentage of Malaysian digital asset investors are retail?
Over 72% of investors are retail participants below age 45, indicating strong retail market dominance.
What tokens can be traded on Malaysian exchanges?
Approved tokens include Bitcoin, Ethereum, Ripple, and 8 others, with new additions like Avalanche and Polygon in 2023.
How do IEOs differ from ICOs?
IEOs operate through regulated platforms with SC oversight, while ICOs are typically conducted directly by startups without intermediary screening.
What security measures protect digital assets?
Approved custodians use advanced cybersecurity protocols including cold storage solutions and multi-signature authentication to prevent unauthorized access.