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INDONESIA’S EVOLVING CRYPTO ASSET REGULATORY LANDSCAPE 2024
Setyawati Fitrianggraeni and Sri Purnama
The surge in crypto-asset transactions in Indonesia has not only captured the interest of the financial market but also necessitated a robust regulatory framework to oversee these digital commodities. Given this market’s rapid growth, understanding the regulatory measures and their implications is crucial for stakeholders and legal practitioners.
Historical Context and Regulatory Evolution
Indonesia has been proactive in regulating the trading of crypto assets. Initially governed by Law Number 32 of 1997 on Commodity Futures Trade, crypto assets were classified under the jurisdiction of the Commodity Futures Trading Supervisory Agency (Badan Pengawas Perdagangan Berjangka Komoditi or BAPPEBTI).[1] This early legislation laid the groundwork for subsequent regulatory developments.
A significant regulatory update came with the Minister of Trade’s Regulation Number 99 of 2018 on General Policy for Implementing Crypto Asset (Aset Kripto) Futures Trading, which further defined crypto assets as commodities that could be traded through futures exchanges. This regulation was pivotal in framing crypto assets within the traditional commodity trading structures and ensuring their trading was subject to formal oversight.[2]
Transition to Digital Financial Assets
The landscape took a transformative turn with the enactment of Law Number 4 of 2023 on the Development and Strengthening of the Financial Sector. This legislation reclassified crypto assets as digital financial assets, part of the broader Technological Innovations Within the Financial Sector (Inovasi Teknologi Sektor Keuangan or ITSK) category. Crucially, this law transferred the regulatory oversight from BAPPEBTI to the Financial Services Authority (Otoritas Jasa Keuangan or OJK), indicating a shift towards integrating crypto assets into the financial services’ regulatory framework.[3]
The Regulatory Sandbox
The OJK has implemented a regulatory sandbox to foster innovation while managing the risks associated with digital financial services. This sandbox is a testing ground for new financial technologies, allowing them to be assessed in a controlled environment before full-scale public implementation
The sandbox is designed to facilitate the development of financial technologies through a structured and supervised framework, ensuring that innovations can be tested safely and effectively. The approach aims to balance regulatory oversight with promoting technological advancement.
The regulatory sandbox has been regulated on Board of Governors Member Regulation Number 19/14/PADG/2017 on the Limited Technology Testing Room (Regulatory Sandbox) Financial Technology, which has been amended by Board of Governors Member Regulation Number 24/7/PADG/2022 on Implementation of The Payment System by The Payment Service Provider and Payment System Infrastructure Organiser. Furthermore, a regulated sandbox for supervision by OJK in the financial technology sector has been regulated on OJK Regulation Number 13 /POJK.02/2018 on Digital Financial Innovation in the Sector of Financial Services (OJK Regulation 13/2018).
Based on OJK Regulation 13/2018, every organiser of ITSK, including both startup companies and Financial Services Institutions, will undergo a 3-stage process before submitting a licensing application:[5]
- The registration stage with OJK, which automatically includes a request for regulatory sandbox testing.
- The Regulatory Sandbox process lasts a maximum of one year and can be extended for six months if necessary. During this process, registered Fintech companies are required to submit regular quarterly performance reports to the OJK.
- The Organiser’s Regulatory Sandbox trial results can be categorized as Recommended, Improved, or Not Recommended. Passing the Regulatory Sandbox process with a “recommended” status enables proceeding with registration/permitting with the OJK.
In the telemedicine sector, the Ministry of Health has also requested that telehealth service providers immediately register with the regulatory sandbox. This is per the Decree of The Minister of Health of The Republic of Indonesia Number HK.01.07/MENKES/1280/2023 on developing a Health Digital Innovation Ecosystem Through the Regulatory Sandbox. The Ministry of Health has carried out limited trials of this system on malaria and is now developing it into telehealth services. Testing through the regulatory sandbox aims to assess the reliability of business processes, technology business models, and telehealth governance.[6] This will allow regulators and service providers to analyze the risks to society if renewable technology is applied, especially in the health sector.
Physical Market Trading
Despite the shift in oversight to the OJK, specific BAPPEBTI regulations remain in force to ensure continuity and stability in the crypto-assets market. These include guidelines for the physical trading of crypto assets through the futures market, which continue to govern the operational aspects of this trading sphere.[7]
BAPPEBTI Regulation Number 8 of 2021 on Guidelines for Organising Physical Market Trading for Crypto Assets (Aset Kripto) on the Futures Exchange, as amended, sets out specific criteria and operational guidelines for physical traders and platforms, underscoring the commitment to maintaining robust oversight and consumer protection in the evolving digital trading environment.[8]
Conclusion
The dynamic nature of the crypto-assets market in Indonesia reflects a broader global trend towards integrating digital assets into recognised financial frameworks. The regulatory adjustments by the Indonesian authorities exemplify a proactive approach to leveraging technological innovations and mitigating associated risks.
As the landscape evolves, all market participants must stay informed about these regulatory changes. The ongoing developments signal Indonesia’s commitment to fostering a secure and robust market for crypto assets, ensuring they contribute positively to the broader economic framework.
Footnotes :
[1] Law Number 32 of 1997 on Commodity Futures Trade.
[2] Minister of Trade Regulation Number 99 of 2018.
[3] Law Number 4 of 2023, Art. 213, 312.
[4] OJK Regulation Number 3 of 2024, Art. 6–9.
[5] Masda Greiyes Nababan, et.al., “Penguatan Regulatory Sandbox dan Scoring System dalam Penerapan Prinsip Kehati-hatian pada Peer-to-Peer Lending”, Legislatif, Vol. 3 No. 1, Desember 2019, p. 61.
[6] Mochamad Januar Rizki, “Memahami Regulatory Sandbox sebagai Uji Instrumen Hukum Industri Fintech dan Telemedisin”, Hukum Online, https://www.hukumonline.com/berita/a/memahami-regulatory-sandbox-sebagai-uji-instrumen-hukum-industri-fintech-dan-telemedisin-lt6451ede29fed4/?page=all#! accessed dated 13 July 2024.
[7] BAPPEBTI Regulation Number 8 of 2021, Art. 14.
[8] Ibid.
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Sri Purnama
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Research Group Transnational Litigation and Tort Law
