The Missing Shield: Addressing Jurisprudential Lag and Structural Misalignment in Malaysia’s Islamic Fintech Regulatory Framework

Abstract

Malaysia is a global leader in Islamic finance, supported by a sophisticated Shariah governance framework and robust regulatory institutions. However, the rapid rise of Islamic fintech has revealed structural tensions within a regulatory architecture originally designed for centralized financial institutions rather than decentralized, technology-driven platforms. This article argues that the issue is not a complete absence of regulation, but a form of regulatory misalignment in which statutory design, supervisory jurisdiction, and Shariah governance mechanisms struggle to keep pace with fintech's speed and functional diversity. Through doctrinal analysis of the Islamic Financial Services Act 2013 and relevant regulatory frameworks, this study identifies gaps in Shariah compliance enforcement, jurisdictional coordination, and consumer religious-risk protection. It reconceptualises the notion of a "legal vacuum" as a jurisprudential-operational gap rather than legislative absence. In response, the paper proposes a structured reform comprising four calibrated models: a standalone Islamic Fintech Act, targeted IFSA amendments, a federal harmonisation mechanism for Shariah fintech governance, and a dedicated consumer protection charter. By translating jurisprudential critique into actionable institutional pathways, this study contributes to the evolving discourse on Islamic fintech regulation. It argues that sustainable leadership in Islamic fintech requires regulatory coherence in ensuring that technological innovation remains aligned with constitutional realities and the higher objectives of Maqasid al-Shariah.