The standard aims to “increase the development of technological innovation in the financial sector” and safeguard users from losses and “fraudulent investments.”
Indonesia’s regulatory agency has issued a new rule that could potentially affect crypto assets in the country. According to local reports, companies must introduce their products into the Regulatory Sandbox of the Financial Services Authority (OJK).
Cryptoassets Will Be Tested in a Regulatory Test Environment
Local reports from media outlet DetikFinance reported on the new regulatory rule issued by the OJK this week. The standard aims to “increase the development of technological innovation in the financial sector” and safeguard users from losses and “fraudulent investments.”
OJK’s new measure requires financial services institutions (FIS) to introduce new products and services into Indonesia’s regulatory sandbox. The regulation reportedly includes banking, insurance, and cryptocurrency companies that “ensure they are suitable for consumer use.” Cryptocurrency companies must be evaluated in the regulatory sandbox before receiving authorization to operate in Indonesia.
Additionally, crypto products and new business models developed by entities that are already licensed by the OJK will also have to go through the sandbox. The chief executive of the Financial Sector Technological Innovation Supervisor, Digital Financial Assets and Crypto Assets, Hasan Fawzi, said the following:
“I believe this is our spirit at OJK, especially in consumer protection and education. We hope that all our regulatory mechanisms are present and have a direct impact on the prevention of fraudulent investments.”
If companies do not comply with the new requirement and continue to operate, they will be considered unlicensed and the product illegal. The regulatory sandbox is a testing mechanism to “assess the reliability of business processes, business models and financial instruments.” Its objective is to ensure that innovation and development of financial technologies are carried out responsibly and with adequate risk management.
Regulatory Landscape in Indonesia
A regulatory sandbox serves as a testing and innovation development space to evaluate products and ensure they are safe and reliable. It provides a sandboxed environment for testing that helps improve security and responsible management in the financial sector.
This regulatory sandbox requirement is a new development for cryptoasset regulations in the country. Furthermore, the supervision and regulation of these assets will be transferred from the Commodity Futures Trading Regulatory Agency (Bappebti) to the OJK starting in 2025. Regarding this matter, Fawzi pointed out the following:
“Now, this sandbox is a good tool for organizers and digital finance professionals of crypto assets to get familiar, they will get used to how it is regulated by the OJK, on the other hand, we will introduce regulation and supervision in the OJK.”
Indonesia has received criticism for its regulatory measures in the past. The country’s cautious approach to cryptocurrencies prohibits their use as a direct payment method for goods and services.
Furthermore, the double taxation of cryptocurrencies is believed to have potentially hampered the growth of the market in the country. As reported by a media outlet, local exchanges expressed concerns about high taxes possibly discouraging user activity on authorized exchanges.
However, Indonesia has one of the highest adoption rates in the world despite its regulatory landscape. Bappebti, the country’s regulator, reported that there were more than 18.51 million investors throughout 2023, which increased by more than 9.8% in February 2024. According to data from Chainalysis, the Asian country ranks seventh in the 2023 Global Cryptocurrency Adoption Index.
By Audy Castaneda
