Sukuk tokenisation a good start

 The introduction of blockchain technology in Islamic finance and investment should set the path to wider participation in wealth creation and accumulation.

Malaysia recently reached an important milestone in finance. Khazanah Nasional, together with the Securities Commission, completed the country’s first tokenised sukuk worth RM100 million.

That may sound complicated, but the idea is actually quite simple.

A sukuk is an investment product, while tokenisation simply means creating a digital version of that investment using blockchain technology.

Think of it as moving from paper records to digital records. The investment itself does not change; only the way it is issued, tracked and transferred.

But why should this matter for the everyday Malaysian investor?

It matters because the real promise of tokenisation is not the technology itself. It is the possibility of making investing more accessible.

Today, many bonds and sukuk are largely the domain of institutions, with retail investors facing high minimum investment amounts and limited access.

Tokenisation could eventually change that by allowing these investments to be broken into smaller units and distributed more widely.

Instead of needing tens of thousands of ringgit to participate in certain investment products, investors may one day be able to gain exposure with just a few hundred ringgit through a mobile app. That is the real opportunity.

The project also shows that Malaysia is serious about modernising its financial markets.

This was not a cryptocurrency experiment. Khazanah led the issuance, CIMB acted as the main adviser and arranger, Maybank participated as lead manager, custodian and investor, while V Systems provided the blockchain technology that powered the project.

The involvement of these institutions is important because it demonstrates that tokenisation is increasingly being viewed as part of mainstream finance rather than something operating on the fringes.

Malaysia is already one of the world’s leading centres for Islamic finance. If we can combine that strength with new technology, there is an opportunity to become a global leader in tokenised Islamic finance as well.

Securities Commission chairman Mohamad Faiz Azmi captured this potential well when he said: “Tokenisation offers potential to improve transparency, broaden participation and support a more vibrant market, and initiatives such as this allow us to test those possibilities in a controlled and credible manner.”

The pilot also demonstrates that Malaysia has the necessary ingredients to build a successful tokenisation ecosystem.

Regulators are prepared to support innovation, established financial institutions are ready to participate, and technology providers are capable of delivering the underlying infrastructure.

The chairman’s comments are particularly noteworthy because they highlight two of tokenisation’s most important promises: broader participation and a more vibrant market.

However, while this is a good first step, we should not overstate what has been achieved.

One of the biggest advantages of blockchain technology is its ability to connect a much larger pool of investors.

Traditional financial products are often distributed through banks and a relatively small group of institutional investors. Digital asset markets, on the other hand, have shown how investments can potentially reach people across different countries and platforms.

The challenge is that the current tokenised sukuk remains largely a closed system involving a limited number of participants.

That is understandable. Regulators and financial institutions naturally want to proceed cautiously, especially with a first-of-its-kind initiative.

However, if a tokenised sukuk is ultimately bought and held by the same institutions through the same channels as a traditional sukuk, then many of the benefits may be limited to operational efficiencies behind the scenes.

The bigger opportunity lies in broader access and wider distribution. The real prize is creating a market where more Malaysians can participate, where investors can access products more easily, and where issuers can reach a larger pool of capital, both domestically and internationally.

A tokenised asset should not merely be a traditional asset on new rails. It should be a gateway to a larger and more accessible market.

In other words, the technology itself is not the goal. Better markets are.

Malaysia’s first tokenised sukuk proves that the concept works. The next challenge is ensuring that tokenisation delivers meaningful benefits to investors, businesses and the wider economy, rather than simply creating a more efficient version of the existing system.

The pilot deserves praise, and those involved should be commended for taking an important first step. But the real success story will be written when tokenisation helps more Malaysians invest, save and build wealth.

That is when its full potential will finally be realised. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.