Malaysia

Introduction The evolution of international trade and governance can be traced through the development of the former provisional agreement, the General Agreement on Tariffs and Trade (“GATT”). It has then transformed into the current World Trade Organisation (“WTO”). Emerging from discussions at the 1944 Bretton Woods Conference, the idea of a global trade body had first taken shape as the proposed International Trade Organization (“ITO”). As support for ITO waned from the U.S Congress, GATT was subsequently established in 1947 as a temporary framework among 23 nations. After decades of negotiations and reforms, the Uruguay Round (1986–1994) led to the creation of the WTO in 1995, which now governs nearly all global trade and provides a more structured and authoritative system. By 2003, the WTO had expanded to 146 members— representing nearly 97 percent of global trade.1 Malaysia, being a member of the WTO since 1 January 1995 and a signatory to the GATT 1947 shortly after its independence since 24 October 1957,2 is committed to promoting fair and transparent trading practices and has further entered into an Agreement on Implementation of Article VI of GATT (“Implementation Agreement of Article VI of GATT”). Malaysia is thus, guided by the Implementation Agreement of Article VI of GATT with regard to the conditions, scope, and procedures for imposing trade remedies. Trade remedies would include antidumping duties, countervailing duties, and safeguard measures. All of which are designed to protect domestic industries from unfair or injurious foreign competition while adhering to international trade rules.3 Anti-Dumping   Under the WTO Anti-Dumping Agreement, which was formerly known as the Implementation Agreement of Article VI of GATT, a framework is provided for member countries to address issues of dumping. Dumping occurs when goods are exported at prices below their normal value in the home market and this practice subsequently causes material injury to domestic industries in the importing country. Following the provisions of the Agreement, WTO member countries that are affected by dumping will be able to take retaliatory actions in the form of imposing a balanced anti-dumping obligation. However, an antidumping duty can be imposed by an importing country only when there is evidence that foreign firms have sold their products below normal value and that this practice has caused harm to the domestic industry.4 Consequently, when dumping has taken place and the importing industry is affected, an increase in price to a certain level may be undertaken by the exporting company to avoid an anti-dumping import duty.5   Building on these global rules, Malaysia has established its Countervailing and Anti-Dumping Administration to investigate and take remedial measures against unfair trade practices by foreign manufacturers or exporters.6 In doing so, Malaysia follows the principles recognised by the WTO and GATT, which condemn the dumping of goods into another country at prices below their normal value when such practices cause or threaten material injury to the established domestic industries.   The Ministry of International Trade and Industry (“MITI”) considers a product to be dumped if it is sold at a price below its normal value. A product is deemed to be sold below normal value if its price is:7   Less than the comparable price of the like product in the course of trade for consumption in the exporting country; or,   In the absence of such a domestic price, less than either: -   (i) The highest comparable price of the like product for the export country in the ordinary course of trade, or (ii) The costs of production of the product in the country of origin, plus reasonable allowances for selling costs and profits.   Between January 2017 and June 2022, Malaysia initiated 25 anti-dumping cases according to the most recent WTO notification.8 As of 30 June 2022, Malaysia has 25 anti-dumping measures in force with iron and steel being the primary products that are affected.   The practical application of Malaysia’s anti-dumping laws was recently illustrated in the Federal Court case of Menteri Kewangan & Ors v Diler Demir Celik Endustru Ve Ticaret AS9 (also known as Diler Iron and Steel Co Inc). The case had arisen from investigations into the import of Turkish steel sold in the Malaysian market, relating to Diler Iron & Steel Turkey Steel Imports. The Court had held that Sections 17 and 18 of the Countervailing and Anti-Dumping Duties Act 1993 must be read together to uphold the Parliament’s intent—to ensure a fair comparison between export price and normal value, which is generally determined at the ex-factory level within reasonable limits.     Subsidies and Countervailing Measures   The Agreement on Subsidies and Countervailing Measures (“SCM Agreement”) governs both the granting of subsidies and the countervailing measures. Both measures are what countries may apply to offset their adverse effects. According to Article 1.1 of the SCM Agreement, subsidies exist when there is a financial contribution by a government or any public body within the territory of a Member State that confers a benefit.10 On this, Article VI of the GATT 1994 and the SCM Agreement define countervailing duties as a special duty that is levied to offset any subsidy bestowed either directly or indirectly, upon either the manufacture, production, or export of any merchandise.11   Despite these provisions, Malaysia has rarely applied countervailing duties. To date, Malaysia has not initiated any countervailing investigations reported to the WTO. This trend is similar in other Regional Comprehensive Economic Partnership members such as Singapore, Thailand, and the Republic of Korea.12 Countervailing duties may be used sparingly because in most competitive markets, foreign subsidies benefit consumers. They are only justified in imperfectly competitive markets, where domestic producers incur losses that outweigh consumer benefits. Consequently, countries apply countervailing duties selectively, targeting cases of clear harm to domestic industries.13     Safeguard Measures   A safeguard measure refers to a temporary tariff or quota that is imposed to protect a domestic industry from serious injury caused by a sudden surge of imports resulting from fair foreign competition.14 Unlike anti-dumping or countervailing duties, which are designed to address unfair trade practices such as dumping or subsidisation, safeguard measures may be applied even when foreign exporters compete fairly.15 Their purpose is to provide domestic industries with temporary relief and time to adjust to the impact of increased imports.16   Safeguard measures are governed by the Safeguards Act 2006 and the Safeguard Regulations 2007, which regulate their investigation, imposition, and revocation, with MITI overseeing such matters.17   Safeguard measures derive their legal authority from Article XIX of GATT. Initially, these measures were seldom used, as some governments preferred implementing “grey area” measures as an alternative.18 Nevertheless, these measures were subsequently superseded by the WTO Safeguard Agreement, which subjects any safeguarding actions to a time limit (also known as sunset clauses).19     Conclusion   Coming full circle, Malaysia’s application of the WTO framework in its own laws demonstrates its commitment to upholding fair and transparent trade practices while safeguarding the interests of domestic industries. As aforementioned, though active steps have been taken in addressing dumping activities by way of anti-dumping laws, other trade remedies, such as countervailing measures have yet to be invoked. This leaves room for further development in Malaysia’s trade remedy practice. Given that the global trade dynamics will inevitably shift along with emerging challenges, Malaysia is likely to see a growing body of cases that test and refine the practical application of its trade laws and the remedies provided in ensuring fair trade practices.     Crowley, Meredith A. ‘An introduction to the WTO and GATT.’ Economic Perspectives 27, no. 4 (2003), 43. World Trade Organization, ‘Malaysia and the WTO’ <https://www.wto.org/english/thewto_e/countries_e/malaysia_e.htm> accessed 27 November 2025. Ministry of International Trade and Industry, ‘Trade Remedies’ <https://www.miti.gov.my/index.php/pages/view/1672?mid=1029> accessed 27 November 2025. Crowley, Meredith A (n 1) 52. World Trade Organization, ‘Briefing note: Anti-dumping, subsidies and safeguards’ https://www.wto.org/english/thewto_e/minist_e/mc9_e/brief_adp_e.htm accessed 27 November 2025. Royal Malaysian Customs Department, ‘Malaysia National Trade Repository (MNTR)’, http://mytraderepository.customs.gov.my/en/ntm/ctp/an_dump/Pages/an_dump.aspx accessed 27 November 2025. Ibid. World Trade Organization, ‘Trade Policy Review’ (WTO, 16 June 2023) WT/TPR/S/436/Rev.1 < https://web.wtocenter.org.tw/file/PageFile/386100/WTTPRS436R1.pdf> accessed 27 November 2025. [2025] MLJU 3103. Cen, Jia Zhen, ‘Disciplining the responses to cross-border subsidies: the case study of EU and US trade remedy investigations against products from Indonesia and Thailand’ (2024) < https://digital.car.chula.ac.th/cgi/viewcontent.cgi?article=13344&context=chulaetd> accessed 27 November 2025. World Trade Organization, ‘Subsidies and Countervailing Measures” (WTO) <https://www.wto.org/english/tratop_e/scm_e/scm_e.htm> accessed 27 November 2025. Koesnaidi, Joseph Wira, and Yu Yessi Lesmana, ‘Trade Remedies Chapter’ (2022) (Jakarta: Economic Research Institute for ASEAN and East Asia) < https://www.eria.org/uploads/media/discussion-papers/FY22/Trade-Remedies-Chapter.pdf> accessed 13 November 2025. Crowley, Meredith A (n 1) 42-57. World Trade Organization (n 12). Crowley, Meredith A (n 1) 42-57. World Trade Organization, ‘Safeguard Measures’ (WTO) <https://www.wto.org/english/tratop_e/safeg_e/safeg_e.htm> accessed 27 November 2025. World Trade Organization (n 8). H. H. Weiler, Sungjoon Cho, Isabel Feichtner, and Julian Arato, International and Regional Trade Law: The Law of the World Trade Organization, Unit XV: Safeguard Measures (New York: NYU School of Law, 2016). Ibid.     Written by: Philip Teoh (Partner) [email protected] Nik Aisha Tasnim Nik Syahril (Trainee Solicitor) [email protected]     Corporate Communications Azmi & Associates 26 January 2026

Introduction: When Seeing Is No Longer Believing Rapid advances in Artificial Intelligence (“AI”) technology have transformed how digital content is created and consumed. While AI has enabled innovation and efficiency, it has also introduced serious risks of exploitation, misappropriation, and deception. One of the most disruptive developments is synthetic media, which is a content generated or manipulated by AI to convincingly imitate real people. As synthetic media becomes increasingly indistinguishable from reality, modern legal systems are being forced to reassess traditional legal assumptions surrounding consent, truth, and ownership.   Understanding Synthetic Media and Deepfakes   Synthetic media refers to digital content created by AI rather than by direct human touch. Common examples include deepfake videos, virtual humans, and augmented reality visuals. A deepfake is a specific form of synthetic media, first popularised in 2017 through online face-swap videos. Since then, deepfake technology has evolved rapidly, enabling the creation of highly realistic audio and video that can depict individuals saying or doing things that never occurred.         How Deepfakes Work: The Technology Behind the Deception   At its core, deepfake technology uses AI to learn patterns from real human faces and voices and then reproduce them. Although the results may appear futuristic or fictional, the process relies on established machine-learning techniques. The primary system used is Deep Learning, particularly Generative Adversarial Networks (“GANs”). A GAN consists of two competing AI systems: a generator, which creates fake images or videos, and a discriminator, which attempts to distinguish fake content from real content. Through repeated competition, the generator improves until the fake content becomes highly realistic.   In addition to GANs, many deepfakes use autoencoding techniques, involving an encoder and a decoder. The encoder breaks facial images into core features such as eye shape and mouth movement, while the decoder reconstructs a face using those features. By combining one person’s facial identity with another person’s movements, AI produces convincing face-swap videos where the motion is real, but the identity is fabricated. This technical sophistication explains why deepfakes pose significant legal challenges.     The Legal Response: Three Emerging Pillars   As of 2026, legislatures worldwide have begun responding to synthetic media by restructuring regulation around three key legal pillars which are safeguarding intellectual property, the protection of personal dignity and preservation of democratic integrity.   Pillar I: Intellectual Property and Digital Personality Rights   Traditionally, intellectual property law offers limited protection over a person’s voice or likeness, as these were not historically considered “copyrightable”. Nevertheless, deepfake technology has exposed the inadequacy of this approach.   As a response, the United States (US) has taken significant legislative steps. For instance, Tennessee enacted the Ensuring Likeness, Voice, and Image Security or ELVIS Act 2024, expanding the right of publicity to protect an individual’s voice and likeness from unauthorised AI replication.   At the federal level, the Nurture Originals, Foster Art, and Keep Entertainment Safe or the NO FAKES Act 2024 further strengthens protection against unauthorised AI-generated recreations.   These laws were catalysed by the viral 2023 release of “Heart on My Sleeve”, which is a song falsely attributed to Drake and The Weeknd as the tune ended up being created using AI by a TikTok user Ghostwriter977. Before being exposed as fake and removed from the platform, the track spread rapidly across the TikTok and Spotify acquiring hundreds of thousands of listens as well which heavily highlighted how AI could commercially exploit an artist’s identity, voice and likeness without consent, prompting urgent legislative reform.   Another high-profile example occurred in October 2023, whereby AI-generated version of Tom Hanks was used in advertisements for a dental plan that he never appeared in or otherwise endorsed. Therefore, the NO FAKES Act is created to address these non-consensual digital replications and to hold individuals or companies liable for the production of unauthorised digital replication of individuals. Together, these developments signal a legal shift toward recognising digital personality as a protectable proprietary interest.   Pillar II: Personal Dignity and Non-Consensual Deepfakes   The protection of personal dignity is the most strictly regulated area, particularly concerning non-consensual intimate deepfakes. In the US, the Tools to Address Known Exploitation by Immobilizing Technological Deepfakes on Websites and Networks Act or TAKE IT DOWN Act 2025 has been enacted to criminalise the distribution of non-consensual intimate deepfakes and requires online platforms to remove such content within 48 hours of a valid request.   This reformation was also driven by the real-world harm. In October 2023, a male student from Aledo High School, Texas had taken “innocent” photos of 14-year-old female students and used AI to create sexually explicit versions of them which then circulated on Snapchat. At the time, Texas law contained loopholes that failed to cover manipulated images, and schools lacked authority over off-campus conduct. Victims and their families were left without meaningful legal recourse, prompting national advocacy that culminated in the TAKE IT DOWN Act 2025.   Similarly, in Jane Doe v ClothOff (2025), a minor in New Jersey sued over an AI platform known as “ClothOff” that converted her fully clothed social media images into hyperrealistic porn content. The case became a landmark federal lawsuit highlighting the necessity of platform liability and rapid content removal mechanisms under the new legislation.   New Zealand offers a notable example of legislative reform as well. Under the Harmful Digital Communications Act 2015 (“HDCA”), posting an “intimate visual recording” without consent is a criminal offence punishable by fines or imprisonment. However, the original law struggled to address AI-generated imagery, as deepfakes were not considered “real” recordings.   To address this loophole, New Zealand introduced the Deepfake Digital Harm and Exploitation Bill, amending the Crimes Act 1961 and the HDCA to explicitly include synthetic or altered imagery. This reform ensures that AI-generated intimate deepfakes are treated as real for criminal law purposes.   This also alerted the New Zealand government as the Netsafe New Zealand, an approved agency under HDCA, which reported 68% spike in “digital extortion” in New Zealand cases linked to AI deepfake threats with victims as young as nine years old. These statistics underscore the urgency of strengthening legal protections against synthetic media harms.   Pillar III: Democratic Integrity and Transparency Obligations   Apart from that, synthetic media poses systemic risks to democratic integrity, particularly the risk of AI-powered misinformation and political manipulation. To address this, jurisdictions are increasingly mandating transparency.   The European Union Artificial Intelligence Act (EU AI Act) imposes strict disclosure obligations under Article 50, requiring AI-generated or AI-modified content, including deepfakes, to be clearly labelled. Where deepfakes are used in real-time contexts, disclaimers must appear from the first second of display.   Norway, as a member of the European Economic Area (EEA), has aligned its national framework through the proposed Norwegian AI Act 2026. Adopting a risk-based approach, with the statutory appointment of the Norwegian Communications Authority (Nkom) as the primary supervisory body and emphasising transparency and preventative governance.     Conclusion: Law in the Age of Synthetic Reality   In conclusion, synthetic media has fundamentally challenged existing legal frameworks. As AI blurs the line between reality and fabrication, the law is increasingly repositioning itself to protect human dignity, democratic trust, and personal identity. While regulatory approaches differ across jurisdictions, a common trend is evident considering that AI is no longer treated as a neutral tool but as a technology requiring active legal governance.       Written by: Ahmad Hafiz Zubir (Partner) [email protected] Nik Afifah Hana Nik Husni (Trainee Solicitor) [email protected]     Corporate Communications Azmi & Associates 6 February 2026

Introduction The EU AI Act defines Generative AI as "foundation models used in AI systems specifically intended to generate, with varying levels of autonomy, content such as complex text, images, audio, or video." (Art. 28b (4) AI Act). Recent advancements, such as multi-modal systems capable of processing and generating different forms of content within a single framework, demonstrate that generative AI is no longer an experimental technology confined to specialist environments. Instead, it has become an accessible and widely used tool in everyday creative and commercial activities. This technological shift has renewed a fundamental legal question: to what extent does copyright law apply to works produced by, or with the assistance of, artificial intelligence? Traditional copyright doctrines of authorship and originality were developed on the assumption that creative works are the result of human intellectual effort. The growing autonomy of generative AI systems challenges this assumption and places pressure on existing legal frameworks.   Unlike conventional software, these systems may operate with minimal human intervention, raising complex issues concerning creative control, ownership, and legal responsibility. This article focuses on generative AI outputs and examines how different legal systems distinguish between AI-assisted works and fully autonomous AI-generated content, particularly in relation to authorship and copyright protection.   Different jurisdictions have responded to these challenges in markedly different ways. This article examines three contrasting approaches: Italy’s reaffirmation of human authorship, Ukraine’s introduction of a sui generis regime for AI-generated outputs, and China’s evolving judicial treatment of AI-assisted creativity.     The Italian Approach: Reaffirming Human Authorship   Italy is the first country to adopt a law on the protection of AI (Law 132/2025), which came into force on 10 October 2025. The legislation is based on and integrates EU Regulation 2024/1869, adopted on 13 June 2024. Italy has addressed the copyright implications of artificial intelligence through targeted amendments introduced by Article 25 of the Italian Artificial Intelligence Law. Section IV of the Italian AI Law contains only this provision, which makes two significant amendments to Law No. 633 of 1941, Italy’s longstanding Copyright Act (Legge sul Diritto d’Autore, “LDA”). These amendments are aimed at responding to the growing challenges posed by AI technologies while preserving the traditional foundations of copyright law.   The recent law introduces amendments to Italian Copyright Law, whereby Article 1 now reads as follows:   “Works of ‘human’ intellectual creation of a creative nature are protected under this law, including those belonging to literature, music, figurative arts, architecture, theatre, and cinematography, regardless of the mode or form of expression, even when created with the aid of artificial intelligence tools, provided they are the result of the author’s intellectual effort.”   This amendment expressly confirms that copyright protection extends to works created with the assistance of AI systems, so long as the work remains the product of a creative and original human intellectual contribution. At the same time, it implicitly excludes fully autonomous AI-generated outputs from copyright protection, as such outputs lack the necessary human intellectual effort.   Under this approach, AI may function as a creative tool, but copyright subsists only where a human author exercises meaningful creative control. Outputs generated entirely by AI systems without significant human involvement fall outside the scope of copyright protection. Italy therefore firmly rejects AI authorship and reinforces the traditional link between copyright and human intellectual effort.     Ukraine’s Sui Generis Regime for AI-Generated Outputs   In contrast to Italy’s human-centric approach, Ukraine has adopted a more innovative legislative solution. In 2022, Ukraine amended its Law on Copyright and Related Rights to introduce a sui generis form of protection specifically designed to regulate outputs generated without human involvement.   The purpose of this reform is to address a legal gap by providing protection for AI-generated outputs that do not satisfy traditional copyright requirements. Under Ukrainian law, such outputs are classified as non-original objects generated by a computer program. For the protection of an AI-generated output, Art. 33(1) of the Ukrainian Copyright Law provides for two criteria: firstly, it is an object that differs from existing similar objects; secondly, it is formed as a result of the functioning of a computer program without the direct participation of an individual in the formation of this object. At the same time, works created by humans using computer technologies are expressly excluded from this category and remain protected under ordinary copyright law.   Sui generis protection lasts 25 years from 1 January of the year following creation and covers only economic rights, as AI-generated outputs are not recognised as “works” and do not attract moral rights. Rights may vest in parties connected to the AI system, such as the initiator, developer, or licensee. Protection applies where the output is novel, automatically generated by software, and created without human creative input beyond activation.   This regime ensures legal certainty for commercially valuable AI-generated content without redefining authorship, supplementing traditional copyright law with a tailored mechanism for automated creation.     Judicial Approaches in China   China on the other hand offers a contrasting model, relying primarily on judicial interpretation rather than legislative reform. Chinese courts have adopted a pragmatic, case-by-case approach that focuses on the extent of human intellectual contribution involved in the creation of AI-generated outputs.   In Li Yunkai v. Liu Yuanchun (2023) Jing 0491 Min Chu No. 11279 (2023), the Beijing Internet Court held that an AI-generated image produced using Stable Diffusion qualified for copyright protection. The court applied four factors, assessing whether the output fell within the fields of literature, art, or science, possessed originality, was expressed in a tangible form, and resulted from intellectual achievement.   The court held that the plaintiff’s active design choices through prompts, layout, composition, and iterative refinements demonstrated sufficient human creativity to confer originality. While AI systems and developers were not recognised as authors, the plaintiff was deemed the author due to his creative control over the image-generation process. This reasoning was later reinforced by the Changshu People’s Court in 2025, further confirming that users who exercise deliberate and creative control over AI outputs may qualify for authorship. Chinese courts have also emphasised transparency and good faith disclosure of AI usage, reflecting an approach that seeks to balance copyright protection with technological innovation.   Conclusion   Italy, Ukraine, and China adopt different approaches but share one principle: AI systems are not recognised as legal authors, and copyright protection depends on human intellectual contribution. Italy excludes fully autonomous AI outputs, Ukraine introduces a sui generis regime for non-original AI content, and China recognises copyright in AI-assisted works where users exercise meaningful creative control.   These divergent approaches reflect the lack of international harmonisation and differing policy priorities. As generative AI becomes more autonomous and widespread, copyright law will need clearer standards and greater transparency to remain effective and relevant.     References: Lavagnini, S. (2025, December 5). Italy adopted the first national law on artificial intelligence. AIPPI. https://www.aippi.org/news/italy-adopted-the-first-national-law-on-artificial-intelligence/. Mayidanyk, L. (2021). Artificial intelligence and sui generis right: A perspective for copyright of Ukraine? Access to Justice in Eastern Europe, 3(11), 144–154. https://doi.org/10.33327/AJEE-18-4.3-n000076. Lai, S., Lim, D., Shi, L., & Tay, J. (2021). Legal implications – Beijing Internet Court grants copyright protection to AI-generated artwork. Allen & Gledhill LLP. https://law.nus.edu.sg/trail/legal-implications-beijing-internetcourt-copyright/#_edn1.       Written by: Ahmad Hafiz Zubir (Partner) [email protected] Nur Alya Azahan (Trainee Solicitor) [email protected]     Corporate Communications Azmi & Associates 23 February 2026

Introduction The global momentum behind digital assets is accelerating rapidly, transforming financial systems into more efficient, inclusive ecosystems. In the United States, 2025 introduced the GENIUS Act, establishing a comprehensive framework for payment stablecoins and offering regulatory clarity to support broader digital asset adoption1. This regulatory certainty aims to require stablecoins to maintain one-for-one reserves and embed AML/CFT obligations for issuers2. This has boosted institutional adoption, with over half of traditional hedge funds reporting exposure to digital assets in 2025, according to recent industry surveys3. In other countries such as Singapore, which has solidified its fintech hub status through policies that integrate blockchain into banking, payments, and asset management while attracting billions in real-world asset (RWA) investments4. Another example is Hong Kong that is easing virtual asset rules and launching a 2025 tokenisation pilot to enhance liquidity and digital investments, with regulatory reforms designed to provide broader access for tokenised financial products5. In the Middle East, jurisdictions such as the UAE have established clear licensing pathways and regulatory regimes that support stablecoin issuance and RWA platforms, positioning the region as a leader in compliant digital asset markets6. RWA tokenisation is predicted to become mainstream, shifting from early pilots to scalable, user-centric infrastructure7.   For Malaysian companies, understanding tokenisation is imperative amid the digitisation of trillions of assets. Failure to adapt risks strategic obsolescence. Tokenisation enables fractional ownership of high-value assets like property or art, democratising access for smaller investors and enhancing liquidity8. It also streamlines operations through programmable smart contracts, reducing costs and settlement times from days to seconds9.   In a volatile economic landscape, companies must grasp tokenisation to capitalise on opportunities in supply chain finance, intellectual property management, and even employee incentives via tokenised equity10.   Before we proceed, a crucial distinction must be made between digitalisation and tokenisation. Digitalisation involves converting physical or analogue assets into digital formats (such as scanning documents into PDFs), improving accessibility without altering ownership structures. Tokenisation, however, encodes rights to an asset on a blockchain as digital tokens, enabling features like divisibility, automated logic, and peer-to-peer transfer, creating “digital twins” of real-world assets that are cryptographically secure and interoperable across platforms11.     What is Tokenisation?   Tokenisation refers to the process of converting real-world assets or rights, such as real estate, stocks, bonds, or even intellectual property, into digital tokens on a blockchain or distributed ledger technology (DLT). These tokens represent ownership stakes or claims, secured by cryptography and verifiable in real-time without intermediaries. At its core, tokenisation bridges the physical and digital worlds, making illiquid assets tradable and accessible globally.   These key features distinguish tokenisation from traditional asset management, such as fractional ownership, which allows high-value assets to be divided into smaller, affordable units. For instance, a multimillion-ringgit property can be tokenised into thousands of tokens, enabling retail investors to own fractions without the barriers of full purchase. This democratises investment, particularly in emerging markets like Malaysia, where it could unlock capital for SMEs and infrastructure projects.   The second feature of tokenisation is programmability, which embeds smart contracts into tokens, automating actions based on predefined conditions. A tokenised bond might automatically distribute interest payments or enforce compliance rules, reducing administrative overhead and errors. This programmability extends to governance, such as voting rights in tokenised funds or conditional transfers in supply chains.   Another feature of tokenisation is interoperability, which ensures that tokens can move seamlessly across compatible blockchains or platforms, fostering composability where tokens interact like building blocks. In finance, this means combining tokenised assets in novel ways, like using a tokenised sukuk as collateral for a loan on another network. However, challenges like standardisation and regulatory harmony must be addressed to realise its full potential.   In Malaysia, tokenisation aligns with national digital economy goals, potentially boosting sectors like Islamic finance through Shariah-compliant tokens. Yet, it requires robust infrastructure to mitigate risks like cybersecurity threats or market volatility.     Regulatory Authorities in Malaysia   Tokenisation is reshaping how value moves in Malaysia, and the regulatory landscape is evolving just as quickly. At the centre of this shift are Bank Negara Malaysia (BNM) and the Securities Commission (SC) Malaysia, each playing a distinct but complementary role.   BNM is focused on what keeps the financial system safe and stable. As transactions migrate onto distributed ledger technology platforms, it guards the fundamentals of our monetary system, ensuring the Malaysian Ringgit remains the single unit of account and that settlement always ties back to central bank money. This includes supervising tokenised deposits issued by licensed banks, reviewing proposals for Malaysian Ringgit-denominated stablecoins and setting expectations on how permissioned and programmable platforms should operate12.   The SC looks at tokenisation through a different lens, one centred on investor protection and market integrity. It regulates tokenised assets that function as securities under the Capital Markets and Services Act 2007, which includes tokenised bonds and sukuk, tokenised fund units and platforms that allow trading or custody of tokenised investment products. If a token promises investment exposure or economic rights, chances are it belongs in the SC’s domain13.   Adding to this framework is the Labuan Financial Services Authority (Labuan FSA), which oversees offshore and innovative digital finance. Labuan FSA facilitates tokenisation through guidelines on securities token offerings and credit token companies, enabling blockchain ecosystems for digital assets in a tax-efficient international financial centre14.   Naturally, tokenisation does not fit neatly into traditional regulatory categories. It blends payments, investments and technology infrastructure all at once. As a result, greater coordination through mechanisms like the Digital Assets Innovation Hub (DAIH) and proposed inter-agency working groups illustrates Malaysia’s direction which is in encouraging innovation while upholding consumer protection and market integrity.     Legal Classification of Tokens   Financial integrity is central to tokenised platforms. Businesses must comply with Anti Money Laundering and Counter Financing of Terrorism (AML/CFT) rules, as well as customer due diligence and know-your-customer (KYC) requirements. These obligations are enforced by BNM’s Financial Intelligence Unit (FIU), which plays a critical role in ensuring that tokenisation does not create new pathways for illicit activity. When tokenised systems process personal data or identity information, businesses must also comply with the Personal Data Protection Act (PDPA), and in some cases may come within the oversight of the Malaysian Communications and Multimedia Commission (MCMC), especially where cross-border data transfers or platform infrastructure introduce additional risks.   These compliance expectations operate alongside Malaysia’s core financial statutes, including the Financial Services Act 2013, the Islamic Financial Services Act 2013 and the Payment Systems Act 2003. These laws continue to govern the institutions and infrastructure that tokenised platforms rely on as they integrate into the broader financial system.   How a token is classified makes all the difference. Investment-style tokens fall under the SC. Tokens that operate like money or bank liabilities fall under BNM. Utility or access tokens may fall outside financial regulation, but still face obligations under consumer and data protection law. Among the categories BNM highlights15, two are especially important for companies exploring tokenised financial products.   Tokenised deposits are digital versions of bank deposits issued by licensed institutions, which means they fit neatly within the existing two-tier monetary system. Stablecoins, on the other hand, are designed to maintain a stable value relative to a reference asset. Malaysia is open to exploring Malaysian Ringgit-denominated stablecoins, but only where they can preserve the singleness of money and meet strong expectations around value stability and redemption.   For businesses, the key takeaway is simple. Tokenisation offers new opportunities, but it also brings a new layer of regulatory and operational responsibility. Whether you are designing an investment product, experimenting with programmable payment flows or integrating distributed ledger technology (DLT) based settlement into your operations, the right structure and the right compliance framework will determine how far your product can go.   Early legal planning is essential. It helps avoid regulatory surprises, builds trust with users and investors and positions your organisation at the front of Malaysia’s emerging digital financial ecosystem.     Malaysian Policy Direction   Malaysia’s approach to tokenisation emphasises a balanced, innovation-friendly framework. BNM’s 2025 Discussion Paper outlines a three-year roadmap from 2025 to 2027, starting with conceptual exploration and progressing to live pilots for tokenised assets by way of proof-of-concepts in key areas like SME financing, Islamic finance and programmable payments.   Furthermore, the BNM’s 2025 Discussion Paper shows a preference for permissioned networks where participants are vetted, prioritising security and system stability. There is strong emphasis on KYC, identity verification and consumer protection to safeguard users, requiring robust due diligence to prevent fraud and ensure transparency.   As Malaysia moves toward the era of tokenised assets, Azmi & Associates stands ready to assist businesses in navigating the regulatory landscape, structuring compliant tokenised offerings and designing governance frameworks that inspire confidence among regulators and investors alike.     References: https://www.bbc.com/news/articles/cd78lvd94zyo. https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-president-donald-j-trump-signs-genius-act-into-law. https://www.aima.org/article/press-release-crypto-friendly-regulatory-changes-accelerate-institutional-investment.html. https://www.ainvest.com/news/singapore-crypto-ecosystem-ultimate-institutional-grade-investment-destination-2025-2512/. https://www.thestar.com.my/business/business-news/2025/11/03/hong-kong-to-ease-digital-asset-rules-launch-tokenisation-pilot-scheme. https://www.regulationtomorrow.com/dubai-and-saudi/cbuae-payment-token-services-regulation/. https://www.coindesk.com/business/2025/06/26/real-world-asset-tokenisation-market-has-grown-almost-fivefold-in-3-years. https://www.investopedia.com/you-can-sell-real-estate-on-the-blockchain-here-s-why-you-should-consider-it-11750095. https://www.thunes.com/insights/blockchain-cross-border-payments/#aioseo-how-do-blockchain-cross-border-payments-work. https://www.investopedia.com/terms/t/tokenised-equity.asp. https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-tokenisation. https://www.bnm.gov.my/-/dp-at. https://www.sc.com.my/resources/media/media-release/sc-seeks-public-feedback-on-proposed-framework-on-tokenisation-of-capital-market-products. https://www.labuanfsa.gov.my/clients/asset_120A5FB8-61B6-45E8-93F0-3F79F86455C8/contentms/img/documents/Legislation_and_Guidelines/Guidelines/Capital_market/2023/FAQ_Guidelines%20on%20Labuan%20Securities%20Token%20Offering_09102023.pdf. https://cointelegraph.com/news/malaysia-central-bank-roadmap-pilot-asset-tokenisation.     Written by: Amera Mohd Yusof (Founding Partner, Amera & Associates Advocates) [email protected] Fadlin Khabir Mohamad Khalid (Associate) [email protected] Shahirrah Shaziman (Legal Intern) [email protected]     Corporate Communications Azmi & Associates 27 March 2026