This article first appeared in Digital Edge, The Edge Malaysia Weekly on April 28, 2025 - May 4, 2025

Southeast Asia’s once-hyped Web3.0 sector, long overshadowed by speculative trading and high-profile collapses, is now undergoing a quiet but determined resurgence. Following a period of decline marked by the implosions of Terra-Luna and FTX, early-stage Web3.0 investment in the region rebounded in 2024. This resurgence is not driven by hype but by infrastructure, compliance and renewed interest from institutional investors.

OSK Ventures Research Series on “Southeast Asia’s early-stage Web3.0 trends”, leveraging proprietary data from Alternatives.pe, shows that Web3.0 deal volume in Southeast Asia increased to 72 in 2024 from 48 in 2023. This recovery mirrors a similar pattern globally, where deal volume rose following a sharp contraction the year before. Regional investors and regulators appear to be taking cues from broader global movements, including institutional re-entry into digital asset markets and growing clarity in regulatory environments.

One of the more important reasons for the rebound lies in improved regulatory confidence. Recent developments in the US, such as the GENIUS Act’s framework for stablecoins and President Donald Trump’s executive order to establish a US digital asset reserve, have helped stabilise market sentiment.

Meanwhile, Southeast Asia has been forging its own path. Both Singapore and Malaysia were among the earliest in the region to issue licences for digital exchanges, custodians and digital payment platforms. The region’s regulators have stepped up their game — for example, the Securities Commission Malaysia (SC) introduced a regulatory sandbox that is currently facilitating pilot programmes for tokenised bonds and sukuk, including those led by sovereign wealth fund Khazanah Nasional Bhd.

This new regulatory clarity has helped unlock institutional interest. While blockchain investment previously tilted towards retail speculation and grassroots innovation, the most striking shift in 2024 was the return of institutional financial players. Global financial institutions that had once observed cautiously from the sidelines are now moving decisively into the space. Barclays, for instance, invested in BlackRock’s Bitcoin ETF. Deutsche Börse is offering crypto custody through Clearstream. PayPal, State Street and Standard Chartered have all expanded digital asset integrations, while Mastercard, Visa and HSBC are exploring tokenised payment and custody frameworks. Clearly, there is a surge in the world’s top financial institutions now supporting crypto-related services.

This institutional wave is reshaping capital flows across the region. Financial services dominated Web3.0 funding in Southeast Asia in 2024, accounting for over half of all capital deployed. While trading platforms like OKX (Singapore), MX Global and HATA Digital still made up much of the deal count, the highest-value transactions were directed towards subsectors such as digital payments, custody and investment management. Companies such as Partior, WadzPay, Oobit and PEXX raised sizeable rounds for blockchain-based payment infrastructure. In wealth and investment services, platforms like SDAX, Cryptomind, BitSave and OpenPad are driving the shift towards decentralised financial products that are enhanced by artificial intelligence (AI) and tailored for institutional and high-net-worth investors.

The broader infrastructure story is equally important. Southeast Asia’s development ecosystem sector saw a surge in deal activity, particularly in Layer 1 and Layer 2 protocols. Firms like AltLayer, Bitlayer Labs and Initia are building modular and scalable blockchains designed for public-private interoperability. Startale Labs is developing multichain frameworks and enterprise-grade Web3.0 developer tools. Marketnode is advancing tokenised market infrastructure, while DiMuto and Autify Network are bringing blockchain and AI together to power supply chain transparency.

Specialised analytics providers such as Chainsight and Mint Blockchain are helping users and institutions navigate the complexity of decentralised data. Their platforms offer intelligence tools essential for risk management, on-chain research and governance decisions across the Web3.0 ecosystem.

Real-world asset tokenisation is one of the most promising verticals emerging from the post-crisis Web3.0 rebuild. In Malaysia, initial exchange offering (IEO) platforms like Kapital DX and Pitch Platforms have facilitated early token offerings, while the SC’s sandbox has paved the way for large-scale tokenisation pilots — including Khazanah’s digital sukuk. The technology is also reaching grassroots assets. DatoDurian, for instance, tokenised ownership of a durian farm, offering a novel model for retail participation in agricultural investments. Ripple’s XRP Ledger and DigiFT in Singapore are also actively enabling RWA frameworks for institutions.

Parallel to these developments is the emergence of digital asset fund management. But unlike adding a new asset class to an existing portfolio, the transition from traditional fund management to managing crypto-native portfolios is far from straightforward. It is not merely a “flip of a switch” — it demands wholesale rethinking of operational infrastructure, compliance models and portfolio processes.

The most immediate difference is custodial. While traditional fund assets are held with qualified custodians like banks, stock exchanges’ central depository systems or trust companies, digital assets often reside in wallets managed directly by funds or with third-party digital asset custodians — many of which are still evolving to meet institutional standards. Licensed custodians, such as CoKeeps and Gambit Custody, operating within Malaysia’s regulatory ambit, are at the forefront of building secure digital custody infrastructure suitable for large-scale portfolio management.

Trading presents another divergence. Traditional asset managers rely on regulated, centralised exchanges with uniform pricing and settlement procedures. In contrast, digital asset trading is fragmented across hundreds of centralised and decentralised venues, many of which require pre-funded accounts and offer no consolidated price discovery. Without central clearing houses, fund managers must coordinate across multiple platforms to manage slippage and execution risks. In this environment, most digital asset exchanges are currently focused on exchange services and could evolve into future gateways for institutional execution.

Liquidity, too, is structurally different. Conventional securities enjoy centralised liquidity with large market-makers and stable bid-ask spreads. In digital markets, liquidity is often scattered, thin and time-sensitive, requiring tactical fund management approaches and sometimes manual routing across exchanges, over-the-counter (OTC) desks or liquidity pools. Settlement cycles in traditional markets typically follow T+1 or T+2 with delivery-versus-payment protocols. In contrast, digital asset settlement can be near-instant but incurs blockchain confirmation times and fees, particularly when moving funds on-chain from exchange accounts.

Even core functions such as valuation and compliance take on new meaning. Traditional fund net asset values (NAVs) are calculated based on official market closings. Web3.0 markets never close — fund managers must define arbitrary cut-off points to value portfolios daily. Compliance is also more complex: real-time monitoring of smart contracts, wallet activity and anti-money laundering (AML) patterns require advanced analytics and blockchain-native tools.

In Singapore, capital markets services (CMS) licensed firms are taking on these challenges head-on. DigiFT and InvestaX are managing tokenised securities through regulated frameworks, while Jada Platform and Octowill are moving towards enabling estate and trust planning for tokenised assets — demonstrating how digital wealth structures can expand beyond trading. These are not simply new wrappers for old funds. They are entirely new operating models built from the ground up.

With the assets under management (AUM) of Malaysia’s asset management industry having exceeded RM546 billion as at mid-2024 and with over 25 million unit trust account holders, the traditional capital markets remain dominant. However, the digital asset segment, though nascent, has begun to carve out meaningful space. The country’s licensed digital asset exchange (DAX) players, including Luno Malaysia, MX Global, Tokenize Technology, Sinegy DAX and Torum International, recorded a combined traded value of RM10.5 billion in 2024, nearly double the RM5.3 billion in 2023. These platforms now serve more than one million users.

Despite this traction, digital asset management remains largely untapped. If this segment were to capture just 5% to 10% of Malaysia’s capital market AUM, it would translate into meaningful AUM in on-chain portfolios — an outcome that would significantly accelerate custodial demand, operational tooling and regulatory innovation.

On the policy front, Malaysia’s SC has not yet introduced a standalone digital asset fund management licence. However, activity is permitted under the SC’s fund management or digital investment management (DIM) licences, subject to additional conditions. The regulator is anticipated to release formal guidelines that address the unique demands of managing tokenised portfolios, ranging from valuation methodologies and compliance protocols to cyber-resilience and investor protection.

Malaysia’s digital fund management ecosystem is not yet mature, but the critical ingredients are falling into place: regulatory intent, foundational infrastructure and institutional awareness. What remains is capital allocation — and the readiness to operationalise what is, by all accounts, a structurally different kind of asset management.

Web3.0-based payments and stablecoins are also evolving steadily. In Singapore, stablecoin payments exceeded US$1 billion in 2Q2024 — double that in the previous quarter. Regional payment start-ups such as FOMO Pay, DTC Pay and TripleA are bringing stablecoin rails to retail and business environments, while networks like Ethereum (Layer-2 via Arbitrum and Optimism) and BNB Chain support rapid settlement. StraitsX’s USD-backed stablecoin XUSD, launched in 2024, has already been adopted across exchanges and decentralised applications.

AI is also playing a larger role in the evolution of Southeast Asia’s Web3.0 landscape. In 2024, more than 30 companies in the region integrated AI tools into their core products.

In the financial services space, OpenPad and Hawksight developed AI-driven investment platforms for yield optimisation. Autify Network and 0xScope are using AI to power logistics and analytics. In user interaction, Ringfence and bythen are enabling personalised digital avatars and generative content creation. Security-focused platforms such as ZarkLab and Uppsala Security are deploying AI to detect vulnerabilities and combat fraud across decentralised applications.

The tone of Web3.0 in Southeast Asia has clearly changed. The sector is no longer driven by speculative frenzy or token hype. Instead, it is maturing into a regulated, infrastructure-led ecosystem shaped by institutional participation and policy foresight. Capital is being deployed more strategically. Governments are building frameworks that prioritise safety, scalability and access. And start-ups are delivering infrastructure that connects the blockchain world to traditional finance in ways that are measurable, compliant and durable.

This is not a return to the speculative era of Web3.0. It is the construction of a digital foundation for the region’s next financial chapter. As frameworks mature and technology converges with policy, Southeast Asia is poised not only to adopt Web3.0, but to shape how it scales, safely and strategically, across the globe.

Sarah Lim is an investment partner at OSK Ventures International Bhd

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