The future of the Labuan International Business and Financial Centre depends more than ever on its capacity to innovate, especially in technology. The banking industry will have to reinvent itself to meet the requirements of generation Y and Z. This is where FinTech drives competitiveness. Governments can facilitate the process by providing a favourable regulatory framework.
Digital Financial Services
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Labuan IBFC continues to provide a fit-for-digital business structures to facilitate various digital financial-related business (DFS) in the Centre.
These include digital-banking, insurtech business to digital intermediaries such as Robo-advisors, digital asset exchanges, crypto trading platforms, blockchain tokens as well as e-payment systems. Labuan entities are required to obtain Labuan FSA’s prior approval before undertaking proposed DFS-related activities.
Among others, in view of the virtual and non-face-to-face contact of DFS businesses, regulatory emphasis will be on the compliance to the AML/CFT and market conduct requirements. This is critical to ensure that all DFS activities in the Centre is not used to front any money laundering or terrorism financing schemes; whilst promoting professional and transparent services in dealings with clients.
Digital Financial Services
The Islamic Digital Asset Centre (IDAC) is an initiative to establish a marketplace that allows and enables players to raise funds and invest funds digitally.
The instruments that will be used in this marketplace are securities token offerings (STOs) — asset-backed tokens which allow illiquid assets to be liquid through digitalisation via a blockchain platform.
These STOs, or as known in Arabic, RAMZ, are Shariah-compliant. RAMZ are represented in digital format and recorded on a distributed digital ledger that is cryptographically secured.
Similar to Sukuk in Islamic capital markets, in the digital space, RAMZ will provide an alternative way of raising funds via tokenisation of assets. These assets can be any Shariah-compliant assets, including Sukuk.