Wednesday, June 19, 2024
Editor's PickMalaysian offshore center positioning itself to become global Islamic digital finance hub

Malaysian offshore center positioning itself to become global Islamic digital finance hub

Malaysian offshore center Labuan International Business and Financial Centre (Labuan IBFC) is taking advantage of the country’s global Islamic finance leadership and its digital capabilities to prime itself as the gateway for a digital-based Shariah financial system.

A total of 85 digital financial institutions are regulated in Labuan IBFC by the Labuan Financial Services Authority (Labuan FSA) including two Shariah digital banks — Asia Digital Bank and Baxian Private and Investment Bank, both Chinese-owned.

“As we continue to strengthen [the] Islamic finance footing in the region, our focus now is to realize the full potential of digital opportunities by offering an all-inclusive solution of a Shariah-based digital regime leveraging on Islamic finance and social-based finance instruments. This could further expand Islamic finance development across emerging markets while building connectivity with [the] wider Islamic finance industry,” explained Nik Mohamed Din Nik Musa, the director-general of Labuan FSA.

Labuan IBFC began developing its digital proposition in earnest in 2017, putting together a welcoming regulatory architecture and building on its Islamic finance advantage. Last year, its regulator launched a digital banking framework and followed up this year with a digital governance and cyber resilience framework as well as the Guiding Principles on Business Continuity Management.

As at the end of September 2021, it has licensed 25 intermediaries, two digital banks, one insurtech, one digital securities exchange, 16 payment systems providers, 18 credit token issuers and 33 digital currency exchanges, bringing the number of digital licensees to 85.

“As digitization for the financial sector evolves, regulatory bodies globally will be posed with the balancing act of determining appropriate ways of regulating these changes vis-a-vis promoting market breakthrough and innovations. Ensuring stability will remain of paramount importance as financial transactions become more seamless, intangible and borderless. Therefore, Labuan FSA is committed to adopting a facilitative approach by developing ‘fit-for-purpose’ requirements to cater for emerging business technologies,” said Nik Mohamed Din.

Labuan IBFC is not the only one vying for the Islamic digital finance center title. Neighboring Brunei is as well — in August, IHTHS Corporation and Kuala Lumpur-headquartered business incubator Greenpro Capital formed a public–private partnership to build a Shariah digital finance and economic zone out of Brunei.


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