Indonesian regulators have announced new rules that could potentially impact cryptocurrency assets in the country. According to local reports, companies will be required to introduce their products into the regulatory sandbox of the Financial Services Authority (OJK).
Cryptocurrency assets to be tested in regulatory sandboxes
According to a local report by news outlet DetikFinance, new regulatory rules were announced by OJK this week. The rules aim to “promote the development of technological innovation in the financial sector” and protect users from losses and “fraudulent investments.”
OJK’s new law requires financial services institutions (FSIs) to enter new products and services into Indonesia’s regulatory sandbox. According to the report, regulation includes banks, insurance and cryptocurrency companies that “ensure they are suitable for use by consumers.”
Cryptocurrency companies must be assessed in a regulatory sandbox before being approved to operate in Indonesia. Additionally, cryptocurrency products and new business models developed by companies already licensed by OJK must also pass the sandbox.
Hasan Fawzi, Supervisor of Financial Sector Technology Innovation, Digital Financial Assets and Crypto Assets, said:
I think this is the spirit of OJK, especially in the areas of consumer protection and education. We hope that all regulatory mechanisms exist and have a direct impact on preventing fraudulent investments.
If a company continues to operate without complying with the new requirements, the product will be considered unlicensed and therefore illegal.
The regulatory sandbox is a testing mechanism to “assess the trustworthiness of business processes, business models and financial products.” The goal is to ensure that innovation and financial technology development are carried out responsibly through appropriate risk management.
Indonesia’s regulatory environment
This regulatory sandbox requirement is a new development in the regulation of crypto assets in the country. Additionally, supervision and regulation of these assets will be transferred from the Commodity Futures Trading Regulatory Authority (Bappebti) to OJK from 2025. Regarding this issue, Fawzi said:
Now this sandbox is a good tool for familiarizing organizers, practitioners of cryptocurrency digital finance. They will become familiar with OJK’s regulatory approach. On the other hand, we will introduce regulation and supervision in OJK.
It is worth noting that Indonesia has been criticized for its regulatory actions in the past. The country’s cautious approach to cryptocurrencies prohibits their use as a direct payment method for goods and services.
Additionally, the double taxation of cryptocurrencies is believed to have potentially hindered the growth of the domestic market. As Bitcoinist reported, local exchanges have expressed concerns that high taxes could discourage user activity on licensed exchanges.
Nonetheless, Indonesia has one of the highest adoption rates in the world despite its regulatory environment. State regulator Bappebti reported that there were over 18.51 million investors throughout 2023, up more than 9.8% in the year to February 2024. The Asian country ranked seventh, according to Chainalytic data.Day 2023 Global Cryptocurrency Adoption Index.
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