The OJK regulation creates space for banks to explore services such as crypto custody, blockchain-based solutions, and crypto-backed lending.
n 2024, Indonesia’s crypto market soared, reaching Rp 556.53 trillion (US$34 billion) in transaction value, a 376 percent increase from the previous year, according to the Financial Services Authority (OJK). With over 22 million investors, Indonesia emerges as a significant player in the crypto asset landscape, showcasing rapid adoption in Southeast Asia.
While Indonesia’s growth is impressive, it is part of a global ecosystem marked by varying levels of adoption. Indonesia’s regulatory advancements and growing investor base could solidify its position in this competitive global market. Yet, with these opportunities also come significant risks, such as extreme volatility, regulatory ambiguity and consumer vulnerabilities. It is critical to strike the right balance between innovation and oversight.
The recently issued OJK Regulation No.27/2024 on the implementation of digital financial asset trading might address these challenges. This regulation, effective on Jan. 10, serves as an implementation of the Financial Sector Development and Strengthening (PPSK) Law. It integrates crypto assets into Indonesia’s formal financial system while safeguarding consumers and markets.
From a regulatory perspective, it redefines the crypto framework. For years, crypto assets in Indonesia were overseen by the Commodity Futures Trading Regulatory Agency (Bappebti), where they were classified as commodities. The OJK regulation represents a major shift, recognizing crypto assets as financial instruments. This reclassification aligns crypto oversight with Indonesia’s broader financial architecture, emphasizing transparency, accountability and consumer protection.
Under the new regulation, crypto exchanges are required to maintain significant capital reserves, ensuring market resilience against volatility. They must also adopt governance practices that align with financial market standards, including real-time transparency and accessibility of trading data for regulatory monitoring. Additionally, only entities registered in Indonesia are permitted to operate, enhancing local accountability.
This shift addresses key challenges in the crypto ecosystem, such as safeguarding consumer trust and mitigating the risk of fraud. It also focuses on creating a level playing field for all participants. Clearing houses and custodians are given crucial roles in ensuring transaction accuracy and asset security. Together, these measures aim to create a safer and more reliable market.
Aiming to balance technological innovation with consumer protection, the regulation also demonstrates Indonesia’s commitment to protecting consumer rights. Aligned with the Personal Data Protection (PDP) Law, crypto businesses must implement stringent data privacy measures. These include informed consent, data minimization and robust security protocols like encryption and regular audits.
Crypto’s complexity remains a double-edged sword, presenting both high-reward opportunities and steep risks for investors. Bitcoin and Ethereum, the market leaders, are notorious for volatility. Stablecoins and non-fungible tokens further diversify the landscape, introducing new dynamics that regulators must address. To manage these complexities, the regulation sets clear criteria for assets eligible for trading, focusing on transparency, utility and traceability. Assets that fail to meet these standards are excluded, ensuring a more structured market.
The integration of crypto into Indonesia’s financial ecosystem presents significant opportunities for traditional banks. The regulation recognizes digital assets as legitimate financial instruments. Accordingly, it creates space for banks to explore services such as crypto custody, blockchain-based solutions and crypto-backed lending.
Banks, long seen as trusted intermediaries, are uniquely positioned to attract tech-savvy consumers seeking secure and regulated digital asset services. If the opportunities are unlocked, banks could explore offerings like secure storage, digital wallets and advisory services, positioning themselves to compete with fintech disruptors. Moreover, collaboration with crypto businesses could help banks navigate blockchain's complexities while ensuring regulatory compliance.
Even so, banks must carefully observe the scope of these opportunities. Banks may engage in ancillary services like custody and payment infrastructure, but the regulation prohibits them from acting as direct crypto traders or speculative investors. This ensures that their involvement aligns with existing banking laws, emphasizing risk management and consumer trust.
Indonesia’s regulatory approach reflects a growing global trend but carries its own distinct characteristics. Countries like Singapore have adopted strict licensing regimes for crypto firms, while the United States applies a patchwork of state and federal regulations. Indonesia’s framework stands out by integrating crypto into traditional finance without disrupting market stability.
The regulation also requires crypto businesses to implement anti-money laundering and know-your-customer (AML/KYC) protocols. They must monitor transactions, report suspicious activities and comply with consumer protection mandates. This is further bolstered by the inclusion of the travel rule, which obligates crypto traders to share information about both sender and receiver of transactions. This ensures traceability across the crypto ecosystem and aligns Indonesia with Financial Action Task Force (FATF) guidelines.
However, it is critical to continue refining these measures to address evolving risks. Rapid market growth demands ongoing vigilance to prevent misuse of digital assets. Ensuring seamless enforcement of AML/KYC measures across all crypto-related entities will be critical in achieving this goal.
The transfer of oversight from Bappebti to the OJK is a turning point in Indonesia’s crypto journey. The new regulation ensures crypto is no longer treated as a commodity but as a regulated financial tool. This clarity is likely to attract both local and international investors, fostering innovation while minimizing risks.
Even with these advancements, regulation alone is insufficient. Ongoing collaboration among regulators, financial institutions and crypto businesses will be essential to refining these policies as the market evolves. Public education will also play a pivotal role. The general public might remain unaware of the risks and opportunities associated with crypto investment. Building a well-informed investor base will be key to sustaining long-term growth.
As we step into this new era of digital finance, it must lead with vigilance and cooperation. Regulators should ensure oversight adapts to evolving technologies. Banks and crypto firms must work together to create innovative yet secure financial solutions. Consumers must be empowered with knowledge to navigate this emerging landscape.
In embracing crypto, Indonesia is not merely following a global trend, it is defining its own path. With a careful balance of innovation and caution, we can build a thriving and resilient financial ecosystem. The journey is just beginning, and the future holds immense promise when all stakeholders work together to ensure long-term success.
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The writer is the head of the Legal and Corporate Secretariat at Bank DBS Indonesia. The views expressed are personal.
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