MAKE THE CUPCAKES: Adjust oven rack to lower-middle position and heat oven to 350 degrees F. Line 2 muffin tins with liners and set aside.
Beat egg whites and whole egg in large measuring cup with a fork to combine. Add cream of coconut, water, vanilla, and coconut extract and beat with a fork until thoroughly combined and set aside.
In a bowl of a stand mixer fitted with the paddle attachment, combine flour, sugar, baking powder, and salt. Mix on the lowest speed to combine, about 30 seconds.
With the mixer still running on the lowest speed, add butter 1 piece at a time, and then beat until the mixture resembles coarse meal, about 2-2 ½ minutes.
With the mixer still running, add 1 cup of the liquid. Increase the speed to medium-high and beat until light and fluffy, about 45 seconds. With the mixer still running, add remaining 1 cup liquid in a steady stream. Stop the mixer and scrape down the bowl, and then beat on medium-high speed to combine about 15 seconds.
Using a 4-Tablespoon scoop, scoop batter into the prepared muffin tins and level the batter with an offset spatula. Bake until a toothpick inserted into the center of a cupcake comes out clean, about 20 minutes, rotating the tins halfway through baking. ***Do not turn off the oven.
Cool the cupcakes in the pans for about 10 minutes, and then remove the cupcakes from the tins and move to wire racks to cool to room temperature.
MAKE THE TOPPING: While the cupcakes are cooling, spread the shredded coconut on a rimmed baking sheet; toast in the oven until shreds are a mix of golden brown and white, about 15 to 20 minutes, stirring 2 or 3 times. Cool the toasted coconut to room temperature.
MAKE THE COCONUT SWISS MERINGUE BUTTERCREAM: Combine the egg whites, sugar, and salt in the bowl of a stand mixer, and set the bowl over a saucepan containing 1 1/2-inches of barely simmering water. Whisk the egg whites constantly until the mixture is opaque and warm to the touch and registers about 120 degrees on an instant-read thermometer, about 2 minutes.
Transfer the bowl to the stand mixer and beat whites on high speed with the whisk attachment until it’s barely warm, registering about 80 degrees, and the whites are glossy and sticky, about 7 minutes.
Reduce the speed to medium-high and beat in the butter 1 piece at a time. Beat in cream of coconut and coconut and vanilla extracts. Stop the mixer and scrape the bottom and sides of the bowl. Continue to beat on medium-high speed until well-combined, about 1 minute.
FROST AND FINISH THE CUPCAKES: Transfer the frosting to a 16-inch pastry bag fitted with a large, round tip. Frost the cooled cupcakes and sprinkle them with toasted coconut.