Labuan FSA Advances Islamic Fintech, Captive Insurance With Shariah Blockchain, Zero-tax Incentive

By Jailani Hasan

LABUAN, Nov 8 (Bernama) -- The Labuan Financial Services Authority (Labuan FSA) is strengthening its digital and Islamic finance landscape with the launch of a Shariah-compliant blockchain masterplan and new tax incentives, aiming to transform Labuan into a leading digital financial hub.

Labuan FSA director-general Nik Mohamed Din Nik Musa said that in May, Labuan FSA unveiled its Shariah blockchain masterplan, which provides a foundational infrastructure for Labuan’s expanding digital finance ecosystem. 

“This initiative supports 109 existing digital financial services, including digital banks, insurtech (insurance technology) providers, e-payment platforms, and digital exchanges. 

“With the i-Box sandbox, the FSA aims to attract fintech (financial technology) innovators and Islamic finance practitioners,” he said at the Labuan IBFC Annual Dinner at Labuan Financial Park Convention Hall today.

He said new Islamic digital banks are expected to enter the market next year, further diversifying and strengthening the region’s digital finance offerings. 

Nik Mohamed Din said Labuan FSA anticipates that these advancements, coupled with artificial intelligence and fintech innovations, would drive predictive analytics, personalised investment strategies, and enhanced risk management.

“In the captive insurance sector, Labuan FSA has set its sights on becoming Asia’s premier hub. 

“Currently, Labuan ranks second in Asia, with approximately 100 captive insurance setups and a structure allowing companies to manage their own risk and achieve cost savings,” he said.

He noted that Labuan has consistently received accolades from European and Asian Captives Review due to its modern regulations and innovative offerings.

He said that to bolster its position, the Budget 2025 has introduced a zero per cent tax incentive for digital-based takaful and related business activities over the next four years. 

“To support this, Labuan FSA plans to release guidance notes on digital takaful captives, making Labuan the first financial centre worldwide to offer such a unique proposition,” he added.

Nik Mohamed Din stressed that Labuan FSA’s commitment to Islamic finance is also reflected in the Islamic digital asset centre (IDAC) initiative, launched in 2022 to promote Labuan as an Islamic finance hub. 

He said the IDAC initiative operates on three pillars -- facilitating the Islamic capital market through digital exchanges, supporting the growth of digital banks and financial players, and developing Islamic social finance options for underserved markets, including expatriates and foreign workers. 

Labuan’s digital exchanges are expected to reach a milestone of US$1 billion (US$1=RM4.38) in asset-backed token listings by the end of the year, driven by the success of “RAMZ” tokens backed by real-world assets.

“With these developments, Labuan FSA is positioning itself as a key player in Asia’s digital finance and Islamic finance sectors, demonstrating resilience and forward-thinking as it looks to a more sustainable and inclusive financial future,” he added. 

-- BERNAMA