Collaboration Is Key to Institutional Crypto Success in Malaysia

By Scarlett Chai, Country Manager of Luno Malaysia
Published: April 29, 2025

In recent years, the narrative surrounding cryptocurrency has shifted dramatically from individual retail investor-driven market cycles to a growing influence of institutional participation. This trend is also evident in Malaysia, where institutions are gradually warming up to the idea of integrating crypto assets into traditional financial frameworks. A recent excerpt from a white paper by Luno, titled Traditional Finance and Crypto in Malaysia, outlines the critical role of collaboration among regulators, businesses, and investors to support institutional crypto adoption in the country.

Evolving Interest from Institutional Investors

Historically, retail investors have led the charge in the crypto space, with noticeable market surges occurring in 2013, 2017, and 2020. However, recent shifts indicate that major price movements are more frequently tied to the activities of institutional investors. In Malaysia, this increasing optimism among institutions about cryptocurrency has been propelled by significant global developments, such as the approval of exchange-traded funds (ETFs) in the United States earlier this year.

According to Luno, interest from business accounts and other institutional services has surged in the past year, marking a shift away from the predominantly retail-focused landscape that characterized the crypto market two years ago. However, regulatory caution remains, as institutions assess how to navigate the complexities of the crypto domain.

Regulation as a Double-Edged Sword

Malaysia’s approach to crypto regulation is notable for its progressiveness. The introduction of the Digital Asset Exchange framework in 2019 positioned the country as a leader in Southeast Asia. The Securities Commission of Malaysia (SC) remains open to dialogue with stakeholders in the crypto industry and continually adapts regulations to foster growth while managing associated risks.

Despite these advancements, the primary focus remains on retail investors, leading to challenges for institutions that seek clear guidelines. Merging traditional financial systems with crypto assets poses additional regulatory ambiguities. However, initiatives like the SCxSC Fintech Summit 2024 illustrate a commitment to bridging this gap by encouraging meaningful interactions between traditional financial institutions and crypto stakeholders. Case studies, such as the collaboration with Halogen, Malaysia’s first licensed fund manager to offer crypto products, highlight how proactive engagement with regulators can forge pathways for institutional investment in crypto.

The Impact of Cultural and Ethical Considerations

Malaysia’s rich tapestry of ethnic groups—including Malays, Chinese, and Indians—carries diverse perspectives on emerging technologies, particularly cryptocurrencies. The interplay between Islam and finance is particularly pertinent, as Malaysia is recognized globally for its leadership in Islamic finance. The Sharia Advisory Council’s role in determining the permissibility of crypto assets within the Islamic framework is vital. While many Muslim investors show growing interest in crypto, there remains uncertainty surrounding the Sharia compliance of certain digital asset products, complicating institutional adoption.

As such, ongoing communication with the Shariah Advisory Council and clear regulatory guidance regarding Sharia-compliant crypto products can help align traditional Islamic finance principles with the rapidly evolving crypto landscape.

Strategic Collaboration for Success

Despite the various challenges—regulatory, cultural, and ethical—the ultimate hurdle remains strategic. Institutional players are keen to understand how they can safely integrate crypto assets into their portfolios while effectively managing risks. Many institutions currently face a knowledge gap concerning crypto asset management, suggesting that collaborative efforts may provide a pathway for overcoming these barriers.

Lessons from international markets—be it the US, Europe, or other parts of Asia—may prove instrumental in shaping local approaches. However, to thrive, the Malaysian market must foster a collaborative environment where institutions can share insights and strategies tailored to the country’s unique context.

As the crypto landscape continues to evolve, Malaysia stands at a pivotal juncture where traditional financial institutions are increasingly pressured to explore the potential that cryptocurrency presents. Achieving successful institutional adoption will require a concerted effort from all stakeholders, including regulators, exchanges, and financial institutions. Only through collaboration can Malaysia harness the full promise of digital assets in its financial ecosystem.

For further insights on the relationship between traditional finance and cryptocurrency in Malaysia, consider downloading Luno’s full report, available here.

About the Author

Scarlett Chai serves as the Country Manager for Luno Malaysia, overseeing operations and growth strategies in the region. With a master’s degree in Petroleum Geology from the University of Malaya, Scarlett has a rich background in marketing and partnership development and is passionate about enhancing women’s involvement in the fintech space in Malaysia. Her initiatives include establishing a women-focused crypto community, emphasizing education and empowerment in the sector.

This article is part of the ongoing dialogue about the evolution of the financial landscape in Malaysia and the growing intersection of traditional finance and cryptocurrency.

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