Indonesia flag smashing into a gold bitcoin crypto coin

Indonesia’s new law could see virtual currencies classified as securities

Indonesia’s virtual currency ecosystem is set to undergo a massive upheaval following the introduction of a new legal framework.

Under the latest legal regime, control of the virtual currency industry has been given to the country’s Financial Services Authority (OJK), away from the Commodity Futures Trading Regulatory Agency (CoFTRA). The change implies that Indonesian regulators are beginning to view the asset class as securities rather than commodities.

After months of legislative deliberations, the bill became law on January 12, following President Joko Widodo’s signature. The legislation, widely considered a rejuvenation of outdated laws, was designed to bring Indonesia’s legal framework up to speed with the rapid changes in the digital asset industry.

Opinion has been split following the change of stance from regulators to view digital assets as securities. A cross-section of the industry considers the move a step in the right direction as it indicates progressiveness.

“The shifting connotes that crypto assets may be treated similarly to securities and bring about the application of the whole array of securities-related requirements and restrictions in their offering, sales, market, and mutual funds,” said Asih Karnengsih, head of ABI, a blockchain-based civil society group.

“We must admit that this shift has shown a good understanding from the regulator that crypto assets are broader than just trading,” Karnengsih added.

Under the control of the CoFTRA, virtual currency service providers were saddled with the responsibility of providing the regulator with regular reports of their platform operations. Token issuers and other industry operators groaned under the burden of the commodities watchdog as they struggled to be included in CoFTRA’s approved tokens.

The transition from the CoFTRA to the OJK will take two years to avoid a sudden change to the local ecosystem. During the transition, the country announced that it is working on a centralized exchange for citizens to offer additional protection to local investors.

An array of changes

Indonesian regulators are slowly inching toward new changes for the virtual currency industry as they try to move on from the implosions of centralized actors in 2022.

One proposed change introduced by the Ministry of Trade will see two-thirds of the board composition of virtual currency firms be Indonesian citizens that are residents of the country. In addition to the local directorship requirement, Indonesian firms in the digital asset industry have been urged to use third-party services to store clients’ funds.

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