Establishing a Digital Bank in Labuan IBFC with Zitadelle AG

Labuan, Malaysia—Labuan International Business & Financial Centre (Labuan IBFC) is fast becoming a strategic hub for digital banking. Zitadelle AG helps qualified corporations navigate the process to secure a Commercial and Digital Banking License in Labuan.

Why Labuan IBFC?

• Strategic connectedness: Labuan IBFC bridges ASEAN markets, offering a low‑tax regime and English common‑law framework

• Regulatory flexibility: Since November 2023, the Labuan Financial Services Authority (LFSA) has relaxed capital and deposit rules, running through at least December 2026

• Islamic finance & fintech synergy: Labuan supports both Shariah-compliant banking and digital asset innovation, including initiatives like the Islamic Digital Asset Centre (IDAC) and a five-year tax exemption on Islamic finance structures

What services can be offered from a Labuan (Malaysia) Digital Bank?

1. Deposits and Savings Accounts

   • Accept deposits in any currency (excluding Malaysian Ringgit unless with BNM approval)

   • Offer savings and term deposit products to individuals and businesses

2. Lending and Credit Services

   • Provide credit facilities (e.g. personal, business loans, credit lines)

   • Offer trade finance and project finance (including syndicated loans)

3. Foreign Exchange and Treasury Services

   • Conduct forex trading and hedging solutions

   • Offer money market instruments and structured products

4. Payment and Remittance Services

   • Cross-border and multi-currency payment solutions

   • Remittance services (in partnership with licensed remittance providers or directly)

5. Digital Wallets & Virtual Accounts

   • Provide e-wallet services with onboarding via mobile/web

   • Offer multi-currency virtual account solutions

6. Wealth Management and Investment Services

   • Offer investment advisory and portfolio management (subject to licensing)

   • Provide structured investment products to clients

7. Corporate and Private Banking

   • Services for HNWIs and corporates including offshore account management

   • Asset protection and trust-related services (via partnerships or affiliates)

8. Islamic Banking (Optional)

   • If licensed accordingly, can offer Shariah-compliant banking services

   • Islamic deposits, financing, sukuk structuring, etc.

Capital & Security Deposit Requirements

Standard vs. Relaxed Conditions (under LFSA circular)

*Relaxation extended to December 2026; subject to LFSA discretion considering operational scale and risk profile

Additionally, banks must place a non‑interest-bearing deposit for three years—refundable post-performance review

Tech & Operational Requirements

Applicants must:

1. Maintain an in-house core banking system that supports:

   • Digital corporate banking, trade, loan origination

   • Customer onboarding with e‑KYC

   • Mobile wallets, chatbots, wearable/IoT banking

2. Operate from a Labuan office, complying with the Labuan Financial Services and Securities Act 2010

3. Implement robust KYC/AML, cybersecurity, market conduct frameworks, and a viable exit plan

Shariah and Digital-Asset Ecosystem

Labuan IBFC is designed to support dual-purpose fintech models, facilitating both conventional and Shariah-compliant products:

• IDAC offers a Shariah-compliant digital assets centre, all under a fully supported Islamic regulatory regime

• Opportunities in digital banking, tokenized securities, and digital asset exchanges are all actively encouraged .

Competitive Comparison: Labuan vs. Other Asia Hubs

• Singapore requires SGD 15 million to SGD 1.5 billion capital stages and imposes deposit caps during entry phases

• Bank Negara Malaysia's onshore digital framework demands RM 100–300 million capital, asset limits, and a strict rollout plan .

• Labuan’s lower thresholds (RM 50 million) and free‑zone status undercut onshore models—appealing for startups and non‑bank digital entrants.

The Zitadelle AG Difference

Zitadelle AG offers expertise in every step of the digital banking journey:

• Strategic guidance on relaxed requirements and long-term capital planning

• Support in building compliant core banking infrastructure

• Assistance with regulatory submissions, KYC/AML systems, and exit planning

Final Thoughts

Labuan IBFC offers a truly compelling value proposition:

• Capital-relaxed entry (RM 50 million + RM 2.5 million deposit)

• Robust digital and Shariah fintech ecosystem

• ASEAN gateway with favorable regulations and tax perks

With Zitadelle AG, corporate clients can streamline applications, ensure full compliance, and tap into both conventional and Islamic digital banking landscapes in Labuan.