Press Release on Unveiling Labuan as Asia’s Islamic Digital Asset Centre (IDAC) – Pioneering New Asset Class
Unveiling Labuan as Asia’s Islamic Digital Asset Centre (IDAC) – Pioneering New Asset Class
4 October 2022: The Labuan Financial Services Authority (Labuan FSA) hosted a forum on “Unveiling Labuan as Asia’s Islamic Digital Asset Centre – Pioneering New Asset Class” on 4 October 2022 in Kuala Lumpur, Malaysia. The forum was hosted in conjunction with the Global Islamic Finance (GIFF2022) from 5 to 6 October 2022.

In line with the commitment made by Labuan FSA in the Labuan IBFC Strategic Roadmap 2022-2026, the strategic goal of the Islamic Digital Asset Centre or in short, IDAC, is to attract more digital assets and Fintech players to Labuan, and to carve out a niche in the digital Islamic finance space. This is unique in the world and will provide an alternative platform to the conventional digital finance landscape.

As demand for sustainable finance is on the rise, the delivery of Islamic financial instruments is given a new lease of life, brought about by the advent of Islamic Fintech or the digital delivery of Islamic finance. Labuan IBFC is envisaged to play a significant role as a fund raising and investment hub in the global digital space, with a niche in ESG and Shariah compliant activities. The unveiling of IDAC is timely, to serve as a complete digital ecosystem, bringing together technology driven solutions in terms of fund raising and promoting economic development in other sectors within Islamic finance, potentially making Labuan the digital gateway with Islamic finance capabilities for all types of global investors and players.

In his Welcome Address, Mr. Nik Mohamed Din Nik Musa, Director-General of Labuan FSA said “Labuan’s role in Islamic finance is gaining in significance. Labuan IBFC has a comprehensive infrastructure that supports and accords certainty as well as integrity for Shariah-based structures. Leveraging on its dual financial system, Labuan IBFC’s shariah-compliant sectors have also showed its potential to expand and innovate”.

Labuan IBFC is underpinned by a comprehensive set of laws and regulations governing Islamic financial services under a separate Labuan Islamic financial services and securities Act, alongside the conventional counterpart. Labuan FSA has been proactive in developing new regulations that integrate Islamic finance, ESG agenda and digital financial innovations, and the issuance of guidelines such as the Guidance Note on Issuance of Green, Social and Sustainability Sukuk, aimed at creating a more dynamic and robust ecosystem for Sukuk issuance. In future, Labuan FSA will continue to roll-out relevant guidelines on digital assets, ESG and Islamic finance to further enhance the governance of the centre. In addition, the Shariah Supervisory Council of Labuan FSA has issued a pronouncement on the minimum compliance criteria for offering of Labuan Islamic digital-based solutions, highlighting the Shariah permissibility for such offerings in the Labuan IBFC.

Under IDAC, the availability of virtual listing using blockchain technology and smart contract have enabled global investors who are looking for new asset classes including ESG and Shariah compliant investment products, to look to Labuan IBFC for raising funds via securities token offering (STO).

Mr. Nik Mohamed Din said “the IDAC agenda is on track and Labuan IBFC has launched its first Labuan Islamic/ESG Digital Exchange last month, possibly the world’s first of such exchange. In particular, SMEs that are interested to raise fund cost effectively and tap the ESG and Islamic investors from South East Asia and Middle East for example, can leverage on Labuan’s IDAC”.

The recently launched first Shariah-compliant ESG-based digital exchange (Labuan Exchange) will focus on tokenisation of securities including digital sukuk, allowing for immediate buying and selling of securities through its integrated blockchain technology solution and support from a comprehensive ecosystem. It augurs well for Labuan IBFC to create a competitive market environment as a fund raising and investment hub in the digital space.

Labuan FSA licensed its first digital finance related entity in 2017, and has since expanded with a wide range of digital businesses and players operating in the Labuan IBFC digital space. The Centre is now home to more than 90 digital financial services providers including digital asset platforms, fintech fund, digital banks, insurtech, digital token issuance and licensed digital securities exchanges using blockchain technology.

The half-day Pre-GIFF forum was attended by about 250 participants from financial institutions, fintech companies, legal firms, regulatory and advisory related professionals including from Asia Pacific, Middle-East, African and European regions as well as from USA. The forum was appreciated by the participants and have benefited from the information imparted by the speakers.


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