Malaysia has emerged as one of Southeast Asia’s most progressive fintech markets, offering a comprehensive regulatory framework that balances innovation with consumer protection. This week’s article highlights the regulatory landscape in Malaysia for founders considering expansion into Malaysia.
Understanding fintech regulations in Malaysia
Malaysia’s fintech ecosystem operates under a multi-regulator framework primarily overseen by Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC). They act as “gatekeepers”, bearing significant responsibility for relevant regulated activities. The regulatory approach emphasises activity-based regulation rather than entity-focused oversight, allowing regulators to adapt to evolving business models and technologies. This flexibility has proven essential as fintech continues to transform traditional financial services delivery.Fintech regulations are not governed by a single law, but rather by a collection of existing legislations, notably the Capital Markets and Services Act 2007 (CMSA), and Financial Services Act (FSA) and the Islamic Financial Services Act (IFSA) respectively. These laws apply to fintech activities depending on the nature of the services or products offered. Fintech companies are also subject to anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations. This article excludes Labuan’s fintech regulatory framework, as it applies to offshore entities and usually operates under a separate jurisdiction from Malaysia’s domestic ecosystem.
Leading fintech sub-sectors in Malaysia
The major fintech sub-sectors in Malaysia include equity crowdfunding, Peer-to-Peer (P2P) financing, WealthTech, e-money, and digital assets.
Digital banking
Malaysia’s digital banking framework represents one of the most significant developments for fintech founders. To date, BNM has issued five digital banking licenses to carefully selected consortiums, including notable players like Aeon Bank and GX Bank.Licensed digital banks are expected to promote financial inclusion while maintaining strict internal controls.
Wealth technology (Wealthtech)
In Malaysia, Digital Investment Management (DIM) is an online investment platform that uses algorithms to create and manage personalised portfolios with a minimum investment requirement as low as RM50 to RM100. All operators are licensed by the SC under the Licensed Fintech Intermediaries framework. Notable platforms include StashAway and Wahed Invest.
The robo-advisor sector in Malaysia continued to strengthen year by year, reflecting the broader maturity and resilience of the capital market. A recent SC’s report indicates the total asset under management is around USD376 mil.
Digital assets
The Capital Markets & Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 prescribes digital assets which satisfy conditions laid out in the order as securities. Therefore, the SC has revised the Guidelines on Recognized Market to regulate the trading of digital assets in Malaysia via registered Digital Asset Exchange (DAX) platforms.
DAX platforms allows investors to trade permitted digital assets, notably prominent tokens including Bitcoin (BTC), Ether (ETH), Ripple (XRP), Litecoin (LTC) and Bitcoin Cash (BCH) and other cryptocurrencies approved by the SC. Notable platforms include Luno and Hata.
Additionally, the SC also regulates digital asset custody and the issuance of digital tokens under the Guidelines on Digital Assets, specifically governing Initial Exchange Offerings (IEOs) and Digital Asset Custodians (DACs).
Regulated digital asset custody providers include CoKeeps and Gambit Custody.
An IEO allows businesses in Malaysia to raise funds through the issuance of digital tokens on approved platforms. To date, the SC has granted approvals to KLDX and PitchIN.
In 2025, SC released a consultation paper to seek public feedback on a proposed framework for tokenised capital market products.
E-money
E-money has become an essential part of daily financial activities from buying groceries to paying for services, digital wallets and online payments have revolutionised commerce. Notable players include Touch ‘n Go and BigPay.
Revised E-Money Policy Document issued in 2025 establishes stricter governance, enhanced cybersecurity measures, and improved financial safeguards.
E-service platforms
E-service platforms under the SC’s Guidelines on Recognised Markets help facilitate the wider distribution of capital market products, such as unit trusts, through e-services platforms like e-wallet or e-payment service providers. Notable players include Versa and TNG eWallet.
Alternative financing platforms
Malaysia’s alternative financing sector operates under well established framework under the SC’s Guidelines on Recognised Markets.
Peer-to-Peer (P2P) financing allows businesses to obtain financing from a pool of investors via a P2P platform. Similar to a loan, P2P financing investors provide capital in return for interest payment and repayment of the capital. Presently, there are 16 operators that are registered by the SC.
Equity Crowdfunding (ECF) platforms enable businesses to raise up to RM30 million and receive equity investments using ECF platforms to publicise and facilitate such offers to a crowd of investors. The low minimum investment threshold usually attracts participation from first time investors who may choose this type of investment as their first asset class due to having a passion or interest in a particular business or venture.
“Buy now, pay later” (BNPL) schemes
The BNPL market in Malaysia has grown rapidly, with over 5 million users and a forecast to reach USD593 mil in BNPL payments this year.
The upcoming Consumer Credit Bill 2025 will regulate consumer credit providers, including those offering BNPL schemes. Regulations include prohibition on coercive sales tactics.
The bill aims to form a new Consumer Credit Consumer Credit Commission to oversee and regulate other credit providers.
Digital insurance or digital takaful Business (DITO)
The Central Bank of Malaysia initiated the DITO licensing in 2025 to address existing gaps in insurance coverage, noting that less than half of Malaysians currently have life or family takaful protection. Present players include Ouch! and DearTime.
The application period for new DITO operators under the Licensing and Regulatory Framework for Digital Insurers and Takaful Operators remains open until 31 December 2026.
Regulatory sandbox
In the absence of specific regulations, the Central Bank of Malaysia’s Fintech Regulatory Sandbox Framework provides a crucial pathway for testing innovative financial solutions in a controlled environment. Recently updated in February 2024, the framework now features two distinct tracks: (a) the Standard Sandbox, open to eligible fintech players, and (b) the newly introduced Innovation Green Lane, an accelerated pathway for existing incumbents collaborating with fintech firms.
In contrast, the SC adopts a cohort-based approach for its Regulatory Sandbox, where selected participants will undergo structured testing phases. The most recent cohort concluded on 31 May 2025, and future participation may likely be expected to follow similar application cycles. Unlike BNM’s rolling-entry model, SC’s cohort system operates on a fixed application window.
Final thoughts
Successful fintech operations in Malaysia require careful regulatory planning. Companies should engage a legal counsel to identify applicable regulatory requirements early, whether under BNM’s purview for payment systems and financial services or SC’s jurisdiction for capital market activities.
As a founder, while the sandbox framework may likely valuable testing opportunities, you may wish to seek legal advice from a fintech lawyer to determine whether your business model faces any regulatory impediments before applying under the sandbox regime. Engaging with the Fintech Association of Malaysia (FAOM) can also help assess the suitability of the sandbox for your solution.