Indonesia issues new digital currency rules guiding financial industry

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Ahead of plans to interpret digital currencies as securities, Indonesia’s Financial Services Authority (OJK) has unveiled a new regulatory playbook to guide the actions of players interested in the asset class.

The OJK’s regulatory guidance is intended to serve as a compass for commercial banks and other financial institutions exploring virtual asset services for their customers.

Details concerning the new rules are sparse, but experts say the move will form the basis for future industry regulations. The OJK is working with the commodities regulator
Bappebti and the Bank Indonesia to iron out the details for the playbook.

The new rules, expected to come into effect in 2025, put forward a raft of provisions for the financial industry, including a requirement for service providers to utilize sandboxes before rolling out digital currency products.

A bird’s eye view of the new rules indicates a keen desire to protect investors from the inherent risks associated with digital currencies. Firms are expected to disclose Web3 innovations to the OJK regularly before their commercial launch, while custody service providers are mandated to separate client funds from proprietary assets.

Described as a “step in the right direction,” the OJK’s digital currency regulation update comes ahead of its widely anticipated control over the local sector. The OJK is expected to take over the reins of control from Bappebti as the country seeks to view digital currencies as securities rather than commodities.

Ahead of the transition, the OJK has opened talks with its counterparts from Singapore, Dubai, and Malaysia over the prospects of a robust digital asset regulatory framework for Southeast Asia.

Putting consumers first

Following the high-profile collapses that rocked the digital currency sector, Indonesian regulators have waded into the space to protect investors.

Regulators moved immediately to implement a minimum quota for local directors of virtual currency service providers operating in the country. The rule requires one-third of the board of service providers to be Indonesian residents to “prevent the top management running away when a problem hits the exchange.”

To ensure uniformity, regulators have floated a national digital asset exchange while Bappebti continues to play its own part by calling for a review of the current tax regime for digital currencies.

“The evaluation is necessary because this regulation has been in place for more than a year,” said Bappebti recently. “Typically, taxes undergo evaluation annually.”

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