Preheat oven to 170°C. Line 2 x 24 mini-muffin tins with cupcake papers.
Spread 2 cups of coconut onto a baking tray in an even layer. Please note 1 cup goes into the cupcake batter and 1 cup is reserved for the icing. Toast until golden brown which will only take around 2 minutes (watch like a hawk!)
Cream the butter with an electric mixer until smooth in a large bowl.
Gradually add the sugar and beat for 3 minutes until fluffy.
Add the eggs one at a time, beating well after each addition. Add the vanilla and beat until combined.
In a separate bowl sift the flour, baking powder and baking soda. Alternately add the dry ingredients and the coconut milk to the batter, beginning and ending with the dry.
Mix until just combined, then stir in 1 cup of toasted coconut.
Fill cupcake liners about 3/4 full with mixture and bake for 12-15 minutes until lightly golden brown.
Allow to cool in the tin for 15 minutes, then turn out onto a wire rack.