KUALA LUMPUR (March 24): Bank Negara Malaysia (BNM) said on Monday that it will facilitate financial sector innovation by leveraging emerging technologies such as asset tokenisation.

“At BNM, we want to ensure accessibility is maintained while safeguarding consumer protection as we promote innovation. We have been working with global regulators to explore blockchain technology. For example, central bank digital currency (CBDC), which is one area we are currently looking into,” said BNM governor Datuk Seri Abdul Rasheed Ghaffour.

Beyond cryptoassets, there is growing recognition of how distributed ledger technology can drive efficiency gains in the financial system. Against this backdrop, regulators and financial institutions are increasingly exploring asset tokenisation, which allows financial assets to be represented on programmable platforms such as blockchain networks.

Among other use cases, BNM sees tokenised deposits as a potential on-chain settlement asset that could complement wholesale CBDC. Like traditional commercial bank deposits, tokenised deposits issued by regulated financial institutions remain a claim against the issuing bank, ensuring their credibility and stability.

These banks would continue to be subject to BNM’s prudential requirements on liquidity and capital, preserving the integrity of the financial system, said Abdul Rasheed. Tokenised deposits, however, would benefit from programmability and atomic settlement, enhancing efficiency while maintaining trust in the existing banking framework.

The BNM governor was speaking at a press conference following the release of the central bank’s flagship publications — the 2024 Annual Report, Economic and Monetary Review, and Financial Stability Review for the Second Half of 2024.

Last week, the Securities Commission Malaysia (SC) announced that it is collaborating with Khazanah Nasional Bhd to introduce tokenisation for bonds and sukuk this year. The initiative aims to broaden retail participation in Malaysia’s capital market by making bonds more accessible to individual investors, addressing the current limitation where only sophisticated investors can participate in certain bond issuances.

SC executive chairman Datuk Mohammad Faiz Azmi had said that the pace of tokenisation depended on regulatory approvals, particularly from BNM.

 Abdul Rasheed said BNM is not in a rush to implement this.  "We want to ensure that we provide the right platform for it to happen. At the same time, we have the appropriate guidelines and safeguards in place to support its development while ensuring a secure environment where consumers are protected,” he said.

According to BNM’s annual report, market observers estimate that the total tokenised market capitalisation (excluding cryptoassets) could reach US$2 trillion (RM8.8 trillion) by 2030. Tokenised assets in fund management and settlement solutions have already gained traction, with initiatives such as the Kinexys Digital Assets platform and the BlackRock's tokenised money-market fund, BUIDL, emerging in the market.

Click here to read more stories on BNM Annual Report 2024.