KUALA LUMPUR: Malaysia is among the more open Islamic markets for cryptocurrency, with regulators allowing several digital assets to be classified as sharia-compliant, according to Fitch Ratings.
“Its Shariah Advisory Council of the Securities Commission (SC) declared several cryptocurrencies sharia-compliant between 2020 and 1H26, including bitcoin, ethereum, ripple and stellar.
“Ten digital asset players were regulated by the SC at end-1H26, including exchanges, custodians and initial exchange offering operators,” Fitch said in a statement.
The rating agency noted that the total trading value on Malaysia’s regulated digital asset exchanges increased by 23% year-on-year to over US$4bil in 2025, but it is still just 2.5% of the domestic equity market value traded. Bank participation remains largely restricted to services for registered operators.
Fitch expects cryptocurrency offerings in Islamic finance to “continue developing gradually in some jurisdictions”, supported by regulatory strategies, enabling regulations and, in some cases, national sharia rulings.
However, it said adoption outside some markets is likely to remain uneven, reflecting divergent religious interpretations, lack of guidance from global Islamic finance standard-setting bodies and still-cautious bank participation.
Fitch also said broader digital-asset infrastructure and tokenisation initiatives may develop more readily than cryptocurrency trading in some markets.
The UAE is emerging as another major virtual-asset hub. Transaction volumes across entities regulated by Dubai's Virtual Assets Regulatory Authority reached nearly US$680bil in 2025, while assets under management exceeded US$2.5bil. More than 55 virtual-asset service providers had been licensed by September 2026.
In 2025, the UAE's Higher Shari'ah Authority deemed dealing in bitcoin permissible. Since then, a small number of conventional and Islamic banks have begun offering cryptocurrency brokerage and custody services, giving the UAE a higher level of direct bank participation than most core Islamic finance markets.
Bahrain is also developing its crypto-asset ecosystem, with nine service providers operating as of September 2026. The Central Bank of Bahrain licensed the country's first stablecoin issuer in June.
Qatar's progress has been more visible in digital-asset infrastructure than in cryptocurrency offerings, potentially supporting blockchain applications for sharia-compliant, asset-backed finance. Saudi Arabia, by contrast, has not enacted legislation governing cryptocurrencies.
Sharia views on cryptocurrencies remain divided. Some prominent scholars consider them non-compliant with sharia principles, while others deem them permissible subject to certain conditions. The emergence of new types of digital assets has also produced differing views on their compliance.
Fitch said the lack of formal guidance from the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB) “limits harmonisation across jurisdictions.”
Islamic banks across the six GCC countries, Turkiye, Pakistan, Jordan and Egypt have some indirect involvement in the cryptocurrency ecosystem, mainly by providing payment services to licensed exchanges. Most rated Islamic banks, however, have not developed material revenue streams from cryptocurrency trading, brokerage, custody or financing.
Greater involvement could support fee income, Fitch said, but could also increase reputational, liquidity, operational and compliance risks, including sharia-compliance risk.
In Pakistan, Darul Ifta at Jamia Darul Uloom Karachi recently issued a fatwa signed by Sheikh Muhammad Taqi Usmani, chairman of the AAOIFI Sharia Board, stating that cryptocurrencies do not constitute wealth under sharia. Fitch said the ruling could weigh on the development of cryptocurrency offerings in Pakistan and potentially other markets.
