The concept of asset tokenization is certainly getting closer than we think here in Malaysia. As this development continues to evolve, one key aspect that we simply cannot afford to overlook is the use of different forms of tokenized money for settlement, remittance and payment purposes. The representation and transfer of tokenized assets are deeply intertwined with how value moves across the financial system. In that context, tokenized money is likely to play a central role at this intersection, by bridging the gap between the traditional financial system and the emerging digital asset economy.
Therefore, in this article, we will explore the three principal forms of tokenized money currently gaining traction globally: (i) Central Bank Digital Currencies (“CBDCs”), (ii) tokenized deposits, (iii) and stablecoins, and examines their legal and regulatory landscape in Malaysia, associated risks and challenges, as well as global trends shaping their development. Finally, we will consider what may realistically be on the horizon for Malaysia as regulators and financial institutions navigate this next phase of digital finance.
From Digital Assets to Tokenized Money: A Structured Overview
When it comes to using tokenized money for settlement, remittance, or even payment purposes, we have certainly come a long way, especially when we look back at how the fintech, cryptocurrency, and broader digital asset markets first began. From the early days of Bitcoin to today’s wave of global regulation and institutional adoption, the evolution has been truly remarkable.
However, to appreciate where tokenized money fits within this evolution, it is helpful to understand how Malaysia’s digital asset landscape is structured today. For clarity and ease of reference, digital assets in Malaysia may broadly be categorized into three key groups:
• Digital Assets, • Digital Twin Representation Tokens, and • Tokenized Money
(i) Digital Assets
To build a foundational understanding, Digital Assets are the earliest and most familiar form to Malaysians. These include cryptocurrencies and other digital assets that are listed and traded on Digital Asset Exchange (“DAX”) platforms regulated by the Securities Commission Malaysia (“SC”), such as BTC, ETH, ADA, DOGE, DOT, LINK, NEAR, and SOL.
Like it or not, while DAXs and these digital assets are regulated by the SC, they have not attracted much institutional attention, and it is largely because trading remains dominated by retail participants, with limited involvement from larger financial institutions.
Essentially, a tokenized capital market product involves the tokenization of existing capital market instruments, such as securities, derivatives, private retirement schemes, unit trust schemes, and other similar products, by creating a digital version that is recorded and managed on a distributed ledger.
While the framework remains under public consultation, its introduction marks a significant regulatory milestone, as clearly signals a shift in direction by moving blockchain and tokenization beyond retail cryptocurrency trading toward greater institutional and regulated use cases.
(iii) Tokenized Money
Finally, the third category, and the main focus of this article: Tokenized Money.
When it comes to Tokenized Money, it is important to recognize that, at the time of writing this article, the concept has yet to be officially introduced or implemented in Malaysia. However, based on global trends and regulatory developments, we anticipate and trust that if Tokenized Money is taking form, it is likely emerging in one or more of the following three forms:
• CBDCs • Tokenized Deposits • Stablecoins
1. Central Bank Digital Currencies (CBDCs)
Essentially, a CBDC refers to the digital representation of central bank money that is issued and backed directly by a central bank. In Malaysia’s case, this would be Bank Negara Malaysia (“BNM”). We believe that there are strong use cases and incentives for BNM to eventually issue its own CBDC in Malaysia, because from a monetary policy perspective, a CBDC enables BNM to maintain effective control over the money supply and policy transmission, while at the same time modernizing the national payment system and enhancing efficiency across the entire payment flow.
Most importantly, the most compelling narrative for the government to advocate for a CBDC lies in its potential to provide far greater transparency and oversight over money flows within the economy, hence offering a relatively immediate solution to long-standing challenges related to tax evasion and corruption.
Because CBDC transactions are recorded on a ledger likely maintained by BNM itself, all transactions carried out on the ledger would attain unprecedented transparency and oversight. In other words, this visibility makes it significantly harder, if not almost impossible, for individuals or entities to conceal unreported income or engage in off-the-books transactions, so long as the transaction is conducted through CBDCs. This would, in turn, greatly reduce tax evasion and enhance compliance.
Similarly, given its full transparency and traceability, a CBDC would also substantially reduce corruption and illicit financial flows, as every transaction on the ledger would leave a clear, auditable trail. There would be no room for unexplained anomalies. Through CBDCs, any form of cash-based opacity would effectively be replaced by on-chain transparency, enabling BNM and the government to maintain a clear and comprehensive view of all transactions and monetary movements.
For these reasons, we believe that if any form of Tokenized Money were to be introduced in Malaysia, CBDCs would have a particularly strong case, and would likely be the first form of tokenized money implemented, given their inherent policy advantages and the level of control they afford.
2. Tokenized Deposits
When we talk about tokenized deposits, it essentially means that banks are tokenizing their clients’ deposits, i.e., representing existing customer deposits in digital token form on a distributed ledger. These tokens still represent the same underlying liability of the bank to its depositor, just expressed in a different technological format.
In other words, the bank is the issuer of those tokenized deposits, but what it is actually doing is converting or representing its customers’ existing deposits as digital tokens that can move and settle instantly on-chain. The key point is that the nature of the deposit does not change, but it remains a regulated bank deposit, covered by deposit insurance, and redeemable 1:1 for fiat currency.
Similar to fiat currency, tokenized deposits can also be used for payments, settlements, and remittance purposes as instructed by clients of the banks. Because these deposits are represented as digital tokens on a distributed ledger, they can move directly between participating institutions and clients without the need for traditional intermediaries such as correspondent banks or clearing agents. This means that a client could instruct their bank to transfer tokenized deposits to another party, whether locally or across borders, and the transaction would be executed in real time on-chain.
The on-chain nature of tokenized deposits makes these transactions substantially faster and often more cost-efficient compared to conventional payment systems. Given that the transaction occurs on-chain, settlement can take place almost instantaneously, eliminating the typical T+1 or T+2 settlement cycles common in today’s banking systems. Similarly, costs are reduced due to the absence of multiple intermediaries, minimal manual reconciliation, and greater automation enabled through smart contracts. Whereas for cross-border remittances, the use of tokenized deposits among interconnected banks can bypass multiple correspondent relationships, thereby improving speed and reducing transfer fees.
3. Stablecoins
Essentially, a stablecoin is a type of token minted on the blockchain with a stable or fixed value. Stablecoin is most commonly pegged to the value of a specific country’s currency. The core idea is that it is pegged 1:1 to that currency. Think of it as a digital twin of fiat currency, engineered to exist and operate entirely within the blockchain ecosystem.
A broad and commonly used example would be USDT or USDC, which are widely adopted by many digital asset players and companies for blockchain-based transactions. These tokens are minted on the blockchain and pegged to the US dollar on a 1:1 basis, and the same concept can apply to other currencies, not just the USD. In theory, and increasingly in practice, any national currency, be it the Ringgit, Euro, Yen or Pound, can also be mirrored on-chain through a stablecoin, as long as the peg is maintained.
Fiat-backed stablecoins are currently regarded as the most trusted and stable form of stablecoin in the market. This model represents the purest type of stablecoin, as it is fully and wholly backed by actual fiat currency held in a treasury.
In this structure, for every 1 stablecoin minted on-chain, there is an equivalent 1 unit of fiat currency deposited and held in reserve, and this means the stablecoin is 100% fully backed by real-world fiat currency.
In the market, this model is widely accepted as the most robust and reliable form of stablecoin. In theory, the risk of a “bank run” is very low, because in the event of redemption, there should always be sufficient fiat currency available in the treasury to fulfil redemptions. In practical terms, this means that if 100 million stablecoins are in circulation, there should be 100 million units of fiat currency in reserve to support them, however, the reality is often slightly more complex.
Instead of keeping 100% of reserves in idle cash, which would earn almost no yield, issuers often deploy those reserves into low-risk, short-term instruments such as government bonds, U.S. Treasuries, or money market funds. While these are highly liquid and considered safe, the risk is not absolute zero. In an extreme black swan event, say, a sudden mass redemption request, the issuer might be forced to liquidate those positions prematurely, possibly at a loss, and even if the loss is marginal, it introduces operational stress and reputational exposure.
Nevertheless, this model remains widely accepted by regulators and institutional investors as the most legitimate and “institution-grade” form of stablecoin in today’s market.
Technical and Regulatory Considerations in Context
Regardless of whether it involves CBDCs, tokenized deposits, or stablecoins, for any form of tokenized money to properly take shape, there are ultimately two key hurdles that must be addressed: technical risks and regulatory risks.
1. Technical Risks Consideration
From a technical standpoint, there remains the underlying challenge often described as the “one chain to rule all” dilemma. Ultimately, whether it is BNM, financial institutions, institutional players, or even global participants, there must be a consensus on which blockchain infrastructure to adopt. While tokenization is undoubtedly an exciting and transformative concept, the reality is that there are hundreds of different blockchains, both public and private, each varying in transaction speed, cost, scalability, uptime, and governance. Not all blockchains are created equal.
The last thing the financial ecosystem would want is to rely on multiple bridges merely to move assets across chains, as this would defeat the very purpose of on-chain efficiency. The true promise of tokenization lies in speed and cost efficiency. Once multiple bridges are introduced, they inherently increase transaction risk, such as potential wormhole exploits, elevate costs, and reduce processing speed, the very benefits tokenization aims to deliver.
2. Regulatory Risks Consideration
On the regulatory front, any form of tokenized money that touches payment systems in Malaysia inevitably leads back to the Financial Services Act 2013 (“FSA”).
Under the FSA, besides Malaysia’s official fiat currency, the Malaysia Ringgit, all other means of payment that we commonly use daily, such as credit cards, debit cards, and electronic money, are categorised as “designated payment instruments”.
Section 2 of the FSA defines a “payment instrument” as:
“any instrument, whether tangible or intangible, that enables a person to obtain money, goods or services or to make any payment.”
Crucially, the FSA also empowers Bank Negara Malaysia to designate an instrument as a designated payment instrument if it is of the opinion that—
“(a) a payment instrument may be of widespread use as a means of making payment and may affect the payment systems in Malaysia; and
(b) it is necessary to maintain the integrity, efficiency and reliability of the payment instrument,
the Bank may, with the concurrence of the Minister, by an order published in the Gazette, designate such payment instrument as a designated payment instrument.”
At present, Malaysia’s prescribed designated payment instruments are limited to (i) charge cards, (ii) credit cards; (iii) debit cards; and (iv) electronic money. In other words, should stablecoins, tokenized deposits, CBDCs, or any other form of digital asset or cryptocurrency be intended for widespread payment use in Malaysia, they would almost certainly need to be aligned with the Financial Services Act 2013 and formally designated as a payment instrument.
Conclusion
Of course, at this stage, what we are seeking to do is to help our clients position themselves strategically for what is to come. Based on our ongoing interactions and discussions with BNM, the SC, and various industry players, one consistent message continues to emerge is that Tokenized Money is certainly coming, and it is likely to arrive sooner rather than later.
If we were to make an informed assessment based on current momentum, we trust that by 2025, or at the latest by Q1 2026, there will be meaningful regulatory and industry developments in this space. As such, corporations operating within the financial, technology, or capital markets ecosystem would be well advised to pay close attention to these developments and begin preparing for the transition toward a tokenized financial landscape.
The Technology Practice Group of Halim Hong & Quek continues to be recognised by leading legal directories and industry benchmarks. Recent accolades include FinTech Law Firm of the Year at the ALB Malaysia Law Awards (2024 and 2025), Law Firm of the Year for Technology, Media and Telecommunications by the In-House Community, FinTech Law Firm of the Year by the Asia Business Law Journal, a Band 2 ranking for FinTech by Chambers and Partners, and a Tier 3 ranking by Legal 500.
If you have any questions on fintech, please feel free to reach out to the partners at the Technology Practice Group for consultation.
About the authors
Ong Johnson Partner Head of Technology Practice Group Fintech, Data Protection, Technology, Media & Telecommunications (“TMT”), IP and Competition Law [email protected]
◦ Lo Khai Yi Partner Co-Head of Technology Practice Group Technology, Media & Telecommunications (“TMT”), Technology Acquisition and Outsourcing, Telecommunication Licensing and Acquisition, Cybersecurity [email protected].
Tokenized Money is Coming: How CBDCs, Tokenized Deposits, and Stablecoins May Reshape Payments in Malaysia
The concept of asset tokenization is certainly getting closer than we think here in Malaysia. As this development continues to evolve, one key aspect that we simply cannot afford to overlook is the use of different forms of tokenized money for settlement, remittance and payment purposes. The representation and transfer of tokenized assets are deeply intertwined with how value moves across the financial system. In that context, tokenized money is likely to play a central role at this intersection, by bridging the gap between the traditional financial system and the emerging digital asset economy.
Therefore, in this article, we will explore the three principal forms of tokenized money currently gaining traction globally: (i) Central Bank Digital Currencies (“CBDCs”), (ii) tokenized deposits, (iii) and stablecoins, and examines their legal and regulatory landscape in Malaysia, associated risks and challenges, as well as global trends shaping their development. Finally, we will consider what may realistically be on the horizon for Malaysia as regulators and financial institutions navigate this next phase of digital finance.
From Digital Assets to Tokenized Money: A Structured Overview
When it comes to using tokenized money for settlement, remittance, or even payment purposes, we have certainly come a long way, especially when we look back at how the fintech, cryptocurrency, and broader digital asset markets first began. From the early days of Bitcoin to today’s wave of global regulation and institutional adoption, the evolution has been truly remarkable.
However, to appreciate where tokenized money fits within this evolution, it is helpful to understand how Malaysia’s digital asset landscape is structured today. For clarity and ease of reference, digital assets in Malaysia may broadly be categorized into three key groups:
• Digital Assets,
• Digital Twin Representation Tokens, and
• Tokenized Money
(i) Digital Assets
To build a foundational understanding, Digital Assets are the earliest and most familiar form to Malaysians. These include cryptocurrencies and other digital assets that are listed and traded on Digital Asset Exchange (“DAX”) platforms regulated by the Securities Commission Malaysia (“SC”), such as BTC, ETH, ADA, DOGE, DOT, LINK, NEAR, and SOL.
Like it or not, while DAXs and these digital assets are regulated by the SC, they have not attracted much institutional attention, and it is largely because trading remains dominated by retail participants, with limited involvement from larger financial institutions.
(ii) Digital Twin Representation Tokens
The second category is Digital Twin Representation Tokens, which refers to tokenized capital market products. This concept was introduced for the first time by the SC in its Public Consultation Paper No. 1/2025 on the “Proposed Regulatory Framework for Offering and Dealing in Tokenised Capital Market Products”
Essentially, a tokenized capital market product involves the tokenization of existing capital market instruments, such as securities, derivatives, private retirement schemes, unit trust schemes, and other similar products, by creating a digital version that is recorded and managed on a distributed ledger.
While the framework remains under public consultation, its introduction marks a significant regulatory milestone, as clearly signals a shift in direction by moving blockchain and tokenization beyond retail cryptocurrency trading toward greater institutional and regulated use cases.
(iii) Tokenized Money
Finally, the third category, and the main focus of this article: Tokenized Money.
When it comes to Tokenized Money, it is important to recognize that, at the time of writing this article, the concept has yet to be officially introduced or implemented in Malaysia. However, based on global trends and regulatory developments, we anticipate and trust that if Tokenized Money is taking form, it is likely emerging in one or more of the following three forms:
• CBDCs
• Tokenized Deposits
• Stablecoins
1. Central Bank Digital Currencies (CBDCs)
Essentially, a CBDC refers to the digital representation of central bank money that is issued and backed directly by a central bank. In Malaysia’s case, this would be Bank Negara Malaysia (“BNM”). We believe that there are strong use cases and incentives for BNM to eventually issue its own CBDC in Malaysia, because from a monetary policy perspective, a CBDC enables BNM to maintain effective control over the money supply and policy transmission, while at the same time modernizing the national payment system and enhancing efficiency across the entire payment flow.
Most importantly, the most compelling narrative for the government to advocate for a CBDC lies in its potential to provide far greater transparency and oversight over money flows within the economy, hence offering a relatively immediate solution to long-standing challenges related to tax evasion and corruption.
Because CBDC transactions are recorded on a ledger likely maintained by BNM itself, all transactions carried out on the ledger would attain unprecedented transparency and oversight. In other words, this visibility makes it significantly harder, if not almost impossible, for individuals or entities to conceal unreported income or engage in off-the-books transactions, so long as the transaction is conducted through CBDCs. This would, in turn, greatly reduce tax evasion and enhance compliance.
Similarly, given its full transparency and traceability, a CBDC would also substantially reduce corruption and illicit financial flows, as every transaction on the ledger would leave a clear, auditable trail. There would be no room for unexplained anomalies. Through CBDCs, any form of cash-based opacity would effectively be replaced by on-chain transparency, enabling BNM and the government to maintain a clear and comprehensive view of all transactions and monetary movements.
For these reasons, we believe that if any form of Tokenized Money were to be introduced in Malaysia, CBDCs would have a particularly strong case, and would likely be the first form of tokenized money implemented, given their inherent policy advantages and the level of control they afford.
2. Tokenized Deposits
When we talk about tokenized deposits, it essentially means that banks are tokenizing their clients’ deposits, i.e., representing existing customer deposits in digital token form on a distributed ledger. These tokens still represent the same underlying liability of the bank to its depositor, just expressed in a different technological format.
In other words, the bank is the issuer of those tokenized deposits, but what it is actually doing is converting or representing its customers’ existing deposits as digital tokens that can move and settle instantly on-chain. The key point is that the nature of the deposit does not change, but it remains a regulated bank deposit, covered by deposit insurance, and redeemable 1:1 for fiat currency.
Similar to fiat currency, tokenized deposits can also be used for payments, settlements, and remittance purposes as instructed by clients of the banks. Because these deposits are represented as digital tokens on a distributed ledger, they can move directly between participating institutions and clients without the need for traditional intermediaries such as correspondent banks or clearing agents. This means that a client could instruct their bank to transfer tokenized deposits to another party, whether locally or across borders, and the transaction would be executed in real time on-chain.
The on-chain nature of tokenized deposits makes these transactions substantially faster and often more cost-efficient compared to conventional payment systems. Given that the transaction occurs on-chain, settlement can take place almost instantaneously, eliminating the typical T+1 or T+2 settlement cycles common in today’s banking systems. Similarly, costs are reduced due to the absence of multiple intermediaries, minimal manual reconciliation, and greater automation enabled through smart contracts. Whereas for cross-border remittances, the use of tokenized deposits among interconnected banks can bypass multiple correspondent relationships, thereby improving speed and reducing transfer fees.
3. Stablecoins
Essentially, a stablecoin is a type of token minted on the blockchain with a stable or fixed value. Stablecoin is most commonly pegged to the value of a specific country’s currency. The core idea is that it is pegged 1:1 to that currency. Think of it as a digital twin of fiat currency, engineered to exist and operate entirely within the blockchain ecosystem.
A broad and commonly used example would be USDT or USDC, which are widely adopted by many digital asset players and companies for blockchain-based transactions. These tokens are minted on the blockchain and pegged to the US dollar on a 1:1 basis, and the same concept can apply to other currencies, not just the USD. In theory, and increasingly in practice, any national currency, be it the Ringgit, Euro, Yen or Pound, can also be mirrored on-chain through a stablecoin, as long as the peg is maintained.
Fiat-backed stablecoins are currently regarded as the most trusted and stable form of stablecoin in the market. This model represents the purest type of stablecoin, as it is fully and wholly backed by actual fiat currency held in a treasury.
In this structure, for every 1 stablecoin minted on-chain, there is an equivalent 1 unit of fiat currency deposited and held in reserve, and this means the stablecoin is 100% fully backed by real-world fiat currency.
In the market, this model is widely accepted as the most robust and reliable form of stablecoin. In theory, the risk of a “bank run” is very low, because in the event of redemption, there should always be sufficient fiat currency available in the treasury to fulfil redemptions. In practical terms, this means that if 100 million stablecoins are in circulation, there should be 100 million units of fiat currency in reserve to support them, however, the reality is often slightly more complex.
Instead of keeping 100% of reserves in idle cash, which would earn almost no yield, issuers often deploy those reserves into low-risk, short-term instruments such as government bonds, U.S. Treasuries, or money market funds. While these are highly liquid and considered safe, the risk is not absolute zero. In an extreme black swan event, say, a sudden mass redemption request, the issuer might be forced to liquidate those positions prematurely, possibly at a loss, and even if the loss is marginal, it introduces operational stress and reputational exposure.
Nevertheless, this model remains widely accepted by regulators and institutional investors as the most legitimate and “institution-grade” form of stablecoin in today’s market.
Technical and Regulatory Considerations in Context
Regardless of whether it involves CBDCs, tokenized deposits, or stablecoins, for any form of tokenized money to properly take shape, there are ultimately two key hurdles that must be addressed: technical risks and regulatory risks.
1. Technical Risks Consideration
From a technical standpoint, there remains the underlying challenge often described as the “one chain to rule all” dilemma. Ultimately, whether it is BNM, financial institutions, institutional players, or even global participants, there must be a consensus on which blockchain infrastructure to adopt. While tokenization is undoubtedly an exciting and transformative concept, the reality is that there are hundreds of different blockchains, both public and private, each varying in transaction speed, cost, scalability, uptime, and governance. Not all blockchains are created equal.
The last thing the financial ecosystem would want is to rely on multiple bridges merely to move assets across chains, as this would defeat the very purpose of on-chain efficiency. The true promise of tokenization lies in speed and cost efficiency. Once multiple bridges are introduced, they inherently increase transaction risk, such as potential wormhole exploits, elevate costs, and reduce processing speed, the very benefits tokenization aims to deliver.
2. Regulatory Risks Consideration
On the regulatory front, any form of tokenized money that touches payment systems in Malaysia inevitably leads back to the Financial Services Act 2013 (“FSA”).
Under the FSA, besides Malaysia’s official fiat currency, the Malaysia Ringgit, all other means of payment that we commonly use daily, such as credit cards, debit cards, and electronic money, are categorised as “designated payment instruments”.
Section 2 of the FSA defines a “payment instrument” as:
“any instrument, whether tangible or intangible, that enables a person to obtain money, goods or services or to make any payment.”
Crucially, the FSA also empowers Bank Negara Malaysia to designate an instrument as a designated payment instrument if it is of the opinion that—
“(a) a payment instrument may be of widespread use as a means of making payment and may affect the payment systems in Malaysia; and
(b) it is necessary to maintain the integrity, efficiency and reliability of the payment instrument,
the Bank may, with the concurrence of the Minister, by an order published in the Gazette, designate such payment instrument as a designated payment instrument.”
At present, Malaysia’s prescribed designated payment instruments are limited to (i) charge cards, (ii) credit cards; (iii) debit cards; and (iv) electronic money. In other words, should stablecoins, tokenized deposits, CBDCs, or any other form of digital asset or cryptocurrency be intended for widespread payment use in Malaysia, they would almost certainly need to be aligned with the Financial Services Act 2013 and formally designated as a payment instrument.
Conclusion
Of course, at this stage, what we are seeking to do is to help our clients position themselves strategically for what is to come. Based on our ongoing interactions and discussions with BNM, the SC, and various industry players, one consistent message continues to emerge is that Tokenized Money is certainly coming, and it is likely to arrive sooner rather than later.
If we were to make an informed assessment based on current momentum, we trust that by 2025, or at the latest by Q1 2026, there will be meaningful regulatory and industry developments in this space. As such, corporations operating within the financial, technology, or capital markets ecosystem would be well advised to pay close attention to these developments and begin preparing for the transition toward a tokenized financial landscape.
The Technology Practice Group of Halim Hong & Quek continues to be recognised by leading legal directories and industry benchmarks. Recent accolades include FinTech Law Firm of the Year at the ALB Malaysia Law Awards (2024 and 2025), Law Firm of the Year for Technology, Media and Telecommunications by the In-House Community, FinTech Law Firm of the Year by the Asia Business Law Journal, a Band 2 ranking for FinTech by Chambers and Partners, and a Tier 3 ranking by Legal 500.
If you have any questions on fintech, please feel free to reach out to the partners at the Technology Practice Group for consultation.
About the authors
Ong Johnson
Partner
Head of Technology Practice Group
Fintech, Data Protection,
Technology, Media & Telecommunications (“TMT”),
IP and Competition Law
[email protected]
◦
Lo Khai Yi
Partner
Co-Head of Technology Practice Group
Technology, Media & Telecommunications (“TMT”), Technology
Acquisition and Outsourcing, Telecommunication Licensing and
Acquisition, Cybersecurity
[email protected].
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