Malaysia launches roadmap to test blockchain-based asset tokenization

Bank Negara Malaysia has launched a three-year initiative to test how blockchain-based asset tokenization can be used to modernize key aspects of the country’s financial system, including SME financing and Islamic capital markets. The plan, announced a couple of days ago, builds on the central bank’s existing Digital Asset Innovation Hub and will run through 2027.

The program will involve banks, fintech firms and blockchain developers working within a regulated sandbox to pilot real-world use cases. “This is not about adopting technology for its own sake. Each project must show clear economic value,” the central bank said in its discussion paper outlining the roadmap.

The initiative focuses on solving structural challenges such as Malaysia’s RM101 billion ($21.5 billion) SME financing gap, where smaller firms often struggle to secure credit despite strong demand. Under one proposed model, large companies would issue tokenized invoice receivables that smaller suppliers could use as collateral or payment, accelerating cash flow and reducing settlement delays.

A second area of testing will explore tokenized sukuk and other Islamic finance instruments, using smart contracts to automate payments while remaining Shariah-compliant. The roadmap also includes pilots for ESG-linked assets, where payouts would be tied to verifiable environmental metrics to prevent greenwashing.

The central bank said tokenization projects will be assessed against three criteria: measurable real-world benefit, a clear advantage over traditional systems, and technical feasibility using current infrastructure. Pilot projects are expected in 2026, followed by wider trials in 2027. An industry working group co-led with the Securities Commission will oversee development and regulatory coordination.

Malaysia joins a growing group of Asian regulators testing tokenized finance, including Singapore’s "Project Guardian" and Hong Kong’s "Project Ensemble". However, Bank Negara Malaysia reiterated that cryptocurrencies remain outside the scope of the initiative and are not recognized as legal tender due to volatility risks.

Only licensed financial institutions will be allowed to participate in pilots, with early testing restricted to familiar assets such as deposits, loans and bonds, before expanding into more complex instruments. The central bank is accepting feedback on its tokenization paper until March 1, 2026.

If the roadmap advances as planned, tokenized financial products could begin rolling out across Malaysia’s regulated markets from 2027 onward.