Outlook on cryptocurrency regulatory policies in South Korea, Malaysia, and Indonesia

This article is from Finternet 2025 Asian Digital Finance Summit’s roundtable discussion titled “Asian Crypto Frontiers: Balancing Regulation and Compliance for Growth,” hosted by Angelina Kwan, Managing Director of Stratford Finance. The guests include Wong Huei Ching, Director of Digital Financial Assets and Crypto Asset Supervision at the Indonesian Financial Services Authority (OJK); Uli Agustina, Director of Digital Financial Assets and Crypto Asset Supervision at the Indonesian Financial Services Authority; and Harry Kim, Chief Commercial Officer of Kintsugi Technologies in Korea.

Asia Leads in Regulation, Promoting Standardized Development of the Crypto Market

Angelina Kwan: I just returned from Korea Blockchain Week, and the enthusiasm there was incredible. During the event, the Korea Exchange was urged by various parties to launch ETPs (Exchange-Traded Products) as soon as possible. Many said “Hong Kong is already ahead,” which put pressure on them. Now, with a new president in Korea, they are quickly pushing the Digital Assets Basic Act (DABA), and we see relevant regulations gradually taking shape. Harry, can you talk about Korea’s current regulatory progress and how Hong Kong might be involved?

Harry: Korea indeed has a very active retail crypto market. The new president is incorporating digital assets into the national digital financial innovation plan. We are also pushing to redefine “digital assets” legally—initially called “virtual assets,” now shifting toward “digital assets” for clearer regulation and supervision.

Currently, regulation is entering its second phase, which will cover not only exchanges but also custodians, stablecoins, advisors, marketing, and other participants. Although the regulations have not been officially enacted yet, the direction is clear: to establish a more comprehensive and detailed regulatory system to protect users and promote market normalization.

In Korea, advancing or amending new laws typically takes a long cycle: about a year for review, followed by a year of trial implementation, before formal enforcement. So, the whole process usually takes one to two years.

Angelina Kwan: That also means Hong Kong still has time to stay ahead, which is a good thing. For friends looking to expand from Hong Kong to Korea, now might be the opportunity window.

However, I believe Korea’s infrastructure is not yet fully developed. Hong Kong already has licensed exchanges capable of supporting product structuring and launching ETPs, which puts us far ahead. If Korea wants to launch ETPs now, they still need to build a complete supporting system.

In discussions with several guests from Korea, we believe that the Korea Exchange (KRX) is very likely to launch ETPs within a year. I believe Korean regulators will accelerate their pace this time, and we must stay vigilant.

Evolution of Crypto Regulation in Malaysia Since 2019

Angelina Kwan: Wong, could you introduce recent developments in Malaysia’s regulatory framework?

Wong: Malaysia has incorporated crypto assets into the securities regulatory system as early as 2019. Over the past five or six years, we’ve gained a thorough understanding of local registered exchanges and built confidence. Based on this, we conducted a phased assessment of the market this year, finding that crypto assets are gradually becoming part of investment portfolios, and demand for more complex products is rising.

We decided to upgrade our regulatory guidelines, which are expected to be released early next year. The new rules will give exchanges more autonomy, moving away from a “nanny” approach by regulators. Exchanges can decide independently on listing tokens based on their governance mechanisms.

Of course, deregulation means higher responsibility. We require exchanges to strengthen internal controls for investor protection, including wallet custody arrangements and capital requirements. The overall goal is to promote market institutionalization, attract more large financial institutions, and enhance the credibility of crypto assets within banking systems.

To this end, we have held joint meetings with the central bank to facilitate dialogue between traditional banks and crypto compliance teams, addressing trust and understanding gaps.

Currently, Malaysia has 21 active institutions in the crypto ecosystem, covering crypto funds, derivatives, trading platforms, and upcoming brokerage services. We also allow local brokers to connect to global liquidity pools to offer better prices to clients.

Another focus is asset tokenization. We aim to bring the advantages of the crypto market into traditional capital markets, and are developing relevant regulatory guidelines to clarify issuer and intermediary responsibilities, promoting industry standards. Last year, the industry was almost indifferent to this topic, but this year reactions have been enthusiastic, even the central bank has issued discussion papers, showing strong consensus.

In this regard, we have established a sandbox mechanism to pilot the entire process from asset tokenization to payment settlement, further exploring innovative financial applications.

Angelina Kwan: Although this may not fall entirely under your regulatory scope, I’d like to understand Malaysia’s central bank stance on stablecoins. Stablecoins are now a hot topic, especially in asset tokenization, where they could become primary payment tools. Are you working with the central bank to develop a stablecoin regulatory framework? Additionally, there are some unlicensed stablecoins in the market—these pose risks but also payment opportunities. What is your view on Malaysia’s situation?

Wong: We have had extensive discussions with the central bank and other regulators on stablecoins. Overall, the central bank supports stablecoin development, especially those pegged to the Malaysian Ringgit (MYR).

A few months ago, the central bank launched a sandbox, inviting companies to submit real-world use cases to test MYR-backed stablecoins. I have also been encouraging capital market and crypto participants to actively explore this direction.

We believe that if we can demonstrate genuine market demand for MYR stablecoins, future discussions on other foreign currency stablecoins will be smoother. Ultimately, it depends on—whether there is actual utility.

Indonesia’s Regulatory System Reform: Transition of Crypto Asset Oversight to OJK

Angelina Kwan: Indonesia’s digital asset market has grown rapidly, with a very active ecosystem. Can you share the reasons behind Indonesia’s swift development and some core regulatory strategies to promote compliance in the crypto industry?

Uli: These developments are closely linked to strong government support. According to recent financial stability reforms, crypto assets have been officially classified as financial assets. We are also in a critical phase of regulatory authority transfer—moving oversight of crypto exchanges and related ecosystems from the Trade Ministry to OJK, to unify regulation alongside other financial services.

Our focus is on building a stable and compliant market environment, strengthening risk management and consumer protection mechanisms. Indonesia’s ecosystem has its local characteristics: we have a regulatory committee, classification system, and clearing institutions responsible for crypto transaction clearing and settlement.

We promote integration between banking and crypto trading—for example, all transactions must go through banks. We also established an official custody institution, requiring 70% of user assets or wallets to be held there to ensure asset security. While not all platforms can meet these standards initially, we are pushing them to do so gradually, to build market trust.

We have also issued a series of new regulations aimed at ensuring crypto assets are not just speculative tools but genuinely participate in the national digital economy. For example, a project tested in the sandbox uses blockchain to record Javanese cattle farming data, creating credit histories for farmers who previously couldn’t access loans. This project has connected with banks, helping them shift from “unlendable” to “lendable.”

We are also promoting tokenization projects in real estate, gaming, and IP assets, expecting these innovations to be implemented gradually. As regulators, we rigorously review platform capital and governance structures, aiming for their future participation in secondary markets, ICOs, or IPOs.

Angelina Kwan: When regulating these companies, have you encountered any challenges? How did you address them?

Uli: Certainly, especially regarding cybersecurity. There have been significant incidents exposing weaknesses in infrastructure. To address this, we coordinate across multiple agencies, not just OJK alone. We invest in education and capacity building, collaborating with Indonesian universities to cultivate blockchain engineering talent.

On the regulatory side, cybersecurity is integrated into our overall framework, with established emergency response mechanisms. We work with the central bank to conduct joint reviews and audits of transactions involving banks and payment gateways, ensuring system security. In case of security incidents, we can respond quickly to minimize impact.

Perpetual Contracts and ETPs: Accelerating Compliance-Driven Exchange Entry

Angelina Kwan: We are seeing a clear trend: traditional finance in various countries is actively entering the crypto space. I recently attended a conference where a licensed exchange in Southeast Asia announced plans to launch perpetual contracts—crypto futures contracts on compliant exchanges.

Not only regulators are pushing this, but traditional exchanges are also moving quickly. For example, Korea’s KRX recently held a five- to six-hour meeting specifically discussing how to introduce ETPs on traditional exchanges. This indicates that regulatory agencies and market forces are accelerating convergence, pushing the crypto market toward compliance and institutionalization.

Harry, Korea has strong cultural assets, like BlackPink and other idol groups. KRX now wants to tokenize these cultural IPs. How do you see this trend? Are Indonesia and Malaysia exploring cultural asset tokenization?

Harry: Yes, Korea is opening up its tokenization market, but the legal framework is still incomplete. The first issue is taxation—Korea currently lacks a clear tax framework, which makes it difficult for companies to operate confidently.

Angelina Kwan: Hong Kong has no such tax issues.

Harry: Unfortunately, Korea is about to start taxing soon, with rates expected between 20% and 25%, possibly as early as next year. Clear tax policies will be the first step to promote market development, clarifying individual and corporate tax obligations on crypto assets.

The second step is legislation. The Basic Act on Digital Assets is currently under review, including provisions on custody mechanisms. Custody and wallet security are critical. The exchange regulatory framework is complete; once these laws are enacted, KRX can officially launch larger-scale tokenization projects.

Malaysia’s Outlook for 2026: Promoting More Tokenization Products and Large Institutional Participation

Angelina Kwan: Please share your expectations for 2026. What developments do you most hope to see in your country’s market?

Wong: I expect more products to be launched in the short to medium term—not just tokens listed on exchanges. We have received positive feedback from traditional financial institutions, including brokers and fund managers, who are actively preparing to issue tokenized or crypto-related products. This is a direction we look forward to next year.

We also anticipate more large institutions entering the Malaysian market. Several are already in active discussions. Additionally, in asset tokenization, we are collaborating with the national sovereign wealth fund Khazanah to promote its bond tokenization project, expected to go live next year. We are also negotiating some public-private partnership projects; although still in dialogue, the progress is promising.

Angelina Kwan: You are the first country in Asia to issue a compliant custody license—that’s very leading.

Wong: Yes, we have established a regulatory framework for digital asset custodians, and three licenses have been issued so far. We are also working with local banks to promote their entry into custody services. The feedback has been very positive, with many banks developing related plans. We believe custody services will further support Malaysia’s crypto and tokenization markets.

Indonesia’s 2026 Outlook: Derivatives Regulation Reform and Accelerated Innovation Sandbox

Angelina Kwan: What are Indonesia’s key plans for 2026? Are there new goals for products and services?

Uli: We plan to elevate exchange operations comprehensively by 2026, with new regulatory requirements focusing on risk management and investor protection to enhance market stability and sustainability.

Next year, we will further develop the derivatives trading regulatory framework. Currently, this area is overseen by commodity trading authorities; we aim to integrate it into a unified platform and regulatory system aligned with crypto assets.

On innovation, we will accelerate the implementation of multiple projects under the regulatory sandbox. Several projects are already under evaluation, with official launches expected next year. These include tokenization of real estate, gold, and government bonds, which are key focus areas.

Our overall goal is to make the digital economy a vital pillar of the national economy. We will strengthen connections with traditional finance, including banks, payment gateways, and custodians. We also encourage more token issuance (ICOs) to enter the market.

In terms of infrastructure, we will enhance financial reporting and assessment capabilities. A recent notice on crypto asset accounting has been issued, aiming to align gradually with international accounting standards.

Finally, on AML/CFT, we plan to strengthen regional cooperation to prevent regulatory arbitrage, especially in cases of wallet theft or cross-border fund transfers, establishing more effective regional coordination and rapid response mechanisms to cyber incidents.