The numbers behind the bet
Islamic finance is why the experiment is worth running. Malaysia accounts for roughly a third of global sukuk (Islamic bond) issuance and ranks highest on the annual Islamic Finance Development Indicator. That base underpins recent moves: on 28 April the SC and sovereign wealth fund Khazanah Nasional priced the country's first tokenized sukuk, a RM100mn ($25mn) issuance, and Maybank and CIMB have since started onchain payment and deposit pilots.
Hamid Rashid, founder and CEO of FIUSS, a Kuala Lumpur venture building Shariah-compliant tokenization infrastructure, told Sandmark that user readiness is part of what makes Malaysia different. Rashid built WaqfChain at his earlier venture, Finterra, in 2019 and found that Malaysian user adoption outpaced what surrounding institutions could support: "The technology was never the bottleneck."
Why Shariah compliance isn't just a label
Beyond adoption, Shariah compliance imposes its own constraints on how the product is built. Sukuk cannot carry riba, or conventional interest; returns must instead be structured as profit-sharing or rental income. Contracts must also avoid gharar, or excessive uncertainty, which extends to smart-contract and settlement design.
Rashid argues that those questions get harder with new technology, where compliance runs through every layer of the stack. "Tokenization is not a technology upgrade. It changes how legal title is evidenced, how money settles, who holds custody, when a transaction is final, and who is liable when code or an oracle fails," he said.
That complexity touches all three regulators and, for waqf (Islamic charitable endowment) assets specifically, Malaysia's state Islamic Religious Councils. It's why FIUSS chose Kuala Lumpur and Labuan over Singapore or Dubai: "Only Malaysia offers that full stack." That infrastructure is difficult to replicate: Shariah scholars, Islamic banks and sukuk legal precedent.
Ecosystem vs location
Malaysia's bet on Islamic finance as its tokenization edge assumes other financial centres cannot compete for the same business. Daniel Lee, CEO of Cactus Custody, argues they can.
He told Sandmark that tokenization is fundamentally about representing existing assets onchain, and on that basis Malaysia's advantage is real: the country has deep sukuk markets and Shariah expertise that shape "the structuring of the underlying assets."
For Shariah-compliant instruments specifically, Lee argues the stakes are higher: “Shariah non-compliance is a reputational failure you cannot quietly patch after the fact, and that risk may be greater when the instrument is programmable.”
Even so, he argues the ecosystem doesn't determine where the resulting business gets done. Any established financial centre "can compete by positioning itself as an international structuring, distribution and liquidity hub" for tokenized Islamic assets, he said, even where the underlying issuers are Malaysian or Middle Eastern – Singapore and Hong Kong being the nearest examples of centres that have played that role for other capital markets products.
Singapore and Hong Kong moved first
Izwan Zakaria, a principal at Kuala Lumpur law firm Izwan & Partners, estimates Malaysia is roughly "12–18 months behind on likely commercial output" compared with Singapore's Project Guardian, run by the Monetary Authority of Singapore (MAS) since 2022. Guardian has drawn more than 40 institutions and reached retail via a Franklin Templeton–DBS tokenized money market fund in November 2025.
Hong Kong's Project Ensemble, led by the Hong Kong Monetary Authority (HKMA) since 2024, is chasing standardization: a "plug-and-play pipeline," per Zakaria, settling interbank tokenized deposits with Standard Chartered, HSBC and BlackRock participating. Hong Kong has run stablecoin licensing since August 2025 and issued the world's first government tokenized green bond in 2023.
Neither Guardian nor Ensemble carries the multi-regulator burden Malaysia's Islamic asset pilots do, a structural cost specific to the asset class Malaysia is trying to own.
From pilots to a market
Still, Rashid warns that a successful issuance is not the same as a market. Maybank–Yinson's ringgit tokenized money pilot tests onchain cross-border payments, while Standard Chartered Malaysia and airline group Capital A are separately piloting a ringgit stablecoin for B2B settlement.
By 2028, Rashid wants to see "repeat issuers, regulated onchain money, enforceable digital ownership, interoperable custody, genuine secondary liquidity and published efficiency gains." Without those, Malaysia will be left with "a collection of technically successful pilots."
That risk is why the regulators moved slowly to begin with, Zakaria argues. A failed ringgit stablecoin or tokenized deposit "at scale may pose significant risks to the national monetary and settlement integrity," he said. The pattern mirrors BNM's approach to fintech licensing before it: "sandbox first, calibrate risk appetite, then open the gate to potential applicants."
Maybank declined to comment. Bank Negara Malaysia, the Securities Commission Malaysia and CIMB were contacted for comment but were unavailable before publication.
