Yang Berbahagia Datuk Hisham Rusli, Authority Member of Labuan FSA,
Yang Berbahagia Datuk Iskandar Mohd Nuli, Exec. Chairman LIBFC Inc.,
Respected Chairmen of Labuan Associations,
Assalamualaikum w.r.t.,

1. A very good morning to all of you, and welcome to the Labuan International Finance Lecture Series 2024. It is my privilege to address you today once again after the success of our last lecture series last year. It is truly inspiring to witness such a remarkable gathering of minds and talents, committed to fostering innovation and transformation. Over the years, the Labuan Lecture Series has maintained a commendable track record in inviting distinguished speakers and experts to speak on topical issues, and we are pleased to have all of you here today for this yearly event.

2. In an era where the business landscape is evolving at an unprecedented pace, driven by digital transformation, economic shifts, changing investor behaviours that place greater value on ESG, this year’s theme, “Synergising Digital Innovation & Islamic Finance,” is both timely and important as we navigate the shifting terrain of global finance. This transformation is not only reshaping industries but also presenting a unique opportunity within the financial sector.

3. The integration of financial technology innovation and Islamic finance presents unique opportunities to enhance transparency, fairness, security, and efficiency in our financial systems. This convergence is revolutionising traditional practices, reshaping finance industry, and expanding access, facilitating greater inclusion in the digital age. One of the most significant developments within this shift is the rise of Islamic financial technology (Islamic FinTech).

4. According to the October 2024 report by S&P Global Ratings, the Islamic finance industry is currently valued at approximately US$3 trillion, with FinTech integration projected to boost this figure by as much as 10 percent by end of 2024. This growth will be further driven by the rapid emerging Islamic FinTech startups offering Shariah-compliant financial products and services, including crowdfunding platforms, peer-to-peer (P2P) lending, and digital banking. Recognising the potential of this expanding sector, Labuan IBFC has been proactive in fostering innovation.

Ladies and Gentlemen,

5. In 2022, Labuan IBFC launched the Islamic Digital Asset Centre (IDAC) initiative, a global initiative aimed at creating new business opportunities by integrating digital solutions into international Islamic financial offerings. One of IDAC’s pillars is to develop Islamic digital exchanges for virtual issuance, listing and trading of Shariah-compliant securities token or RAMZ (Arabic for digital asset) – an innovative Islamic digital asset backed by real world asset, RWA, that has pioneered a new asset class for investment in the global Islamic financial market. This first-of-its-kind platform has created a new avenue for corporations and SMEs with a unique opportunity to raise funds and issue digital assets to investors worldwide more cost effectively and far-reaching. I’m delighted to announce IDAC’s remarkable progress: to date, four RAMZ with nine listings have been listed on Labuan exchanges, collectively valued at an impressive USD820 million within a year’s time since the first listing – and targeted to hit the USD1 billion mark by end of the year! This achievement marks a significant milestone in expanding access to Shariah-compliant as well as ESG compliant digital assets on a global scale. It is also noteworthy that the assets used are gold, EV, precious ceramics and sukuk issuance where their values were unlocked for the issuers and the assets fractionalised for the smaller investors.

6. IDAC’s success with RAMZ highlights the growing role of digital solutions in Islamic finance, and this is where blockchain technology plays a pivotal role. As digital innovation continues to shape the future of finance, blockchain is emerging as a key enabler of transparency and compliance in Islamic financial transactions.

7. Blockchain, designed as a decentralized distributed ledger system, records the entire lifecycle of a transaction on a transparent and accessible platform. While blockchain-based cryptocurrencies have often been criticized for their anonymity and volatility, the core principles of blockchain align closely with Shariah values, which emphasise fraud prevention and promote greater transparency – making it an ideal fit for the future of Shariah-compliant financial solutions done right. Beyond transparency, blockchain’s transformative potential in Islamic finance extends to operational efficiencies and automation.

8. The integration of blockchain in Islamic finance would lower costs and increase the processing speed of transitions, reduce human-related errors and inefficiencies by virtue of automation. Moreover, such integration may also increase shariah compliance as discrepancies can be easily monitored and identified on a distributed ledger. Smart contracts, which automatically enforce contract terms, are seen to facilitate more efficient and shariah-compliant transactions. Smart contract integration is being explored in implementing obligatory charitable contributions (zakat) and automating profit payments under mudarabah (profit-sharing) and murabahah (cost-plus financing) agreements.

9. Indeed, it’s fascinating to see how digital innovation and Islamic finance harmonise so effectively, creating a synergy that promises to revolutionise our approach to finance. Both domains, while seemingly distinct, share common values – transparency, fairness and inclusivity - that complement and reinforce one another.

10. Looking ahead, IDAC 3.0 will focus on promoting Labuan IBFC products, players and infrastructure to the global market through targeted roadshows and strategic collaborations. These roadshows will be tailored to establish “digital twin cities” between Labuan IBFC and designated countries or jurisdictions that are keen in Islamic finance, particularly in areas like dual listings of digital assets. Additionally, forging of MoUs with various government agencies and jurisdictions will further enhance Labuan IBFC’s global reach and strengthen its position as a hub for Islamic digital finance.

11. As part of this global strategy, we will also be working closely with the BIMP-EAGA region countries where Labuan IBFC is poised to lead this zone corridor as a renowned financial hub, playing a key intermediation role to facilitate trade, investments, and financial capital flows into the region, thereby elevating the level of trade in BIMP-EAGA. In line with this, Labuan IBFC is set to kickstart the “BIMP wallet” – a digital wallet initiative featuring an airdrop of RAMZ to the BIMP-EAGA countries. This initiative will foster the creation of a digitally smart community within the BIMP region, acting as a catalyst for wealth generation, especially in digital assets. This project has garnered significant regional recognition at the sixth BIMP-EAGA Senior Minister’s Meeting recently and is particularly timely as Malaysia prepares to assume the ASEAN chairmanship in 2025. Building on this momentum, new types of Islamic tokens will be explored, offering governments, especially in the Asian region, innovative alternative to traditional fundraising mechanisms.

12. In addition to this, the recent Budget 2025 announcement by the Prime Minister, granted full income (0%) tax exemption to Labuan entities engaged in Islamic financial activities, now encompassing Labuan takaful and takaful-related business activities including takaful captives focusing on digital mode of operations. In light of this development, more innovative digital products will be introduced to meet the evolving demands for insurance coverage in unserved and underserved markets, leveraging on the tax incentive to enhance outreach and effectiveness.

13. The financial landscape is rapidly evolving, with asset tokenisation projected to exceed USD16 trillion within the next decade, representing 10% of global GDP. In response, IDAC 3.0 can focus on Islamizing at least 10% of that tokenized value. Similar to JAKIM's, our local halal certification for physical products, our IDAC halal certification for tokens will offer tailored digital investment solutions for the Islamic market.

15. Looking ahead, it is through our collective efforts and shared vision with the industry that we will unlock new opportunities. In this spirit, as we embark on today’s sessions, I encourage you to share your insights and explore the synergies between digital transformation and Islamic finance.

16. In conclusion, I would like to once again express my sincere gratitude to the speakers and all you for being here today. I am confident that the insightful discussions and valuable exchanges will spark innovative ideas and solutions, paving the way for a more inclusive and innovative financial future in Labuan IBFC.

Thank you and wabillahi tawfik wal-hidayah wassalamualaikum warahmatullahi wabarakatuh.