heat oven to 350. line 24 muffin cups with paper liners.
whisk flour, baking powder and salt in a medium bowl, stir in coconut.
beat butter and sugar in large bowl with electric mixer until creamed, about 2 minutes. add eggs one at a time, until blended. beat in coconut extract.
with mixer on low speed, alternately beat in flour mixture and coconut milk, beginning and ending with flour mixture, until just combined.
spoon about 1/4 cup batter batter into each muffin cup. bake 20-23 minutes until a toothpick inserted in center comes out clean. cool 10 minutes, remove cupcakes from pan to wire rack to cool completely.
frosting: melt white baking chips in a small glass bowl in microwave as package directs.
beat butter, cream cheese and coconut extract in large bowl with electric mixer until creamed.
beat in melted white chocolate until blended, on low speed, gradually beat in confectioners sugar.
spread 2 tablespoons frosting onto each cupcake, sprinkle tops with toasted coconut.