Indonesia Financial Services Authority issues draft Regulation on Trading in Digital Financial Assets, Including Crypto Assets

28 November 2024

On 27 August 2024, Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan (“OJK”)) published the Draft Regulation on Trading in Digital Financial Assets, Including Crypto Assets (“Draft OJK Regulation”). The Draft OJK Regulation is intended to transition regulatory and supervisory duties in relation to digital financial assets, including crypto assets and financial derivatives, from the Commodity Futures Trading Authority (Badan Pengawas Perdagangan Berjangka Komoditi (“Bappebti”)) to OJK. This switch in competent authority, mandated by the Financial Services Omnibus Law, is intended to come into effect on 10 January 2025.

This article provides an overview of the Draft OJK Regulation.

Digital financial assets

The Financial Services Omnibus Law provides that OJK will supervise all digital financial assets (“DFA”). The Draft OJK Regulation defines “digital financial assets” as financial assets that are stored or represented digitally, including crypto assets. DFA are traded on digital financial asset markets (“Marketplace”) on DFA platforms (“DFA Platform”), which include the following parties:

  • A DFA Exchange (“Exchange”) is a business entity that organises and operates systems and/or means to enable DFA trading activities. An Exchange under OJK replaces a futures exchange under Bappebti.
  • A DFA Clearinghouse (“Clearinghouse”) is an entity that organises and operates systems and/or means for clearing and ensuring the settlement of DFA transactions. A Clearinghouse under OJK replaces a futures clearinghouse under Bappebti.
  • A DFA Custodian (“Custodian”) is a business entity that manages a DFA depository to store, maintain, monitor, and/or transfer DFA. A Custodian under OJK replaces a futures custodian under Bappebti.
  • A DFA Dealer (“Dealer”) is a business entity that engages in DFA trading, either on its own behalf and/or on behalf of clients. A Dealer under OJK replaces a futures dealer under Bappebti.

These categories are not exhaustive and may include other parties as determined by OJK.

The Draft OJK Regulation sets out the following criteria to enable DFA to be traded on the Marketplace via DFA platforms, as follows:

  • DFA must be issued, stored, transferred, and/or traded using distributed ledger technology, blockchain, or other similar technology;
  • DFA are not financial assets electronically recorded by financial institutions, such as bank account balances displayed on websites and/or mobile banking applications, and scripless shares recorded by the Indonesian Central Securities Depository (Kustodian Sentral Efek Indonesia (KPEI));
  • DFA may not be procured and/or used for activities that violate applicable laws and regulations; and
  • Other criteria set by OJK.

Unlike Bappebti Regulation No. 8 of 2021 on Guidelines for Crypto Asset Futures Trading on Exchange (“Bappebti Regulation No. 8 of 2021”) that generally defines crypto assets as intangible commodities in digital form (meaning they can be either a financial or a non-financial asset), the Draft OJK Regulation specifically stipulates that it is only applicable to DFAs which also include crypto assets.

Crypto assets

The Draft OJK Regulation provides a more detailed and comprehensive definition of a crypto asset than Bappebti Regulation No. 8 of 2021. The Draft OJK Regulation defines a “crypto asset” as a digital representation of value that can be stored and transferred using distributed ledger technology, such as blockchain, to verify transactions and ensure the security and validity of the information, that is issued by private entities rather than guaranteed by a central authority, and that can be electronically transacted, stored, and transferred as digital coins, tokens, or other asset representations, including both backed and unbacked crypto assets.

Crypto assets that can be traded by DFA Platforms on the Marketplace must serve as a native digital representation of value (“digital native”), operate on a publicly accessible distributed ledger technology or blockchain network, possesses intrinsic utility or is backed by underlying assets, is traceable and does not contain features designed to obfuscate ownership or transaction data, and have undergone an evaluation process based on the methodology applicable to the Exchange.

The Draft OJK Regulation expands on the criteria in Bappebti Regulation No. 8 of 2021 by including digital natives and incorporating an evaluation based on the Exchange’s methodology.

Crypto asset list

Exchanges will establish a list of crypto assets that may be traded on the Marketplace. DFA Platforms may only trade crypto assets listed on the crypto asset list and are prohibited from trading crypto assets other than those listed. According to the Draft OJK Regulation, the crypto asset list published by Bappebti will remain valid as long as Exchanges have not yet established a crypto asset list. As of February 2024, Bappebti Regulation No. 2 of 2024 on Crypto Asset List Traded on Crypto Asset Markets has listed 545 crypto assets.

Licensing

DFA Platforms may operate after obtaining a business license from OJK with the following requirements:

  • An Exchange must be a limited liability company established by at least 11 unaffiliated business entities in the form of limited liability companies. The majority of these entities must have been engaged in trading eligible DFA for at least three years. An Exchange applying for a business license must have a paid-up capital of at least IDR500,000,000,000 at the time of the initial application and maintain equity of at least 80% of this paid-up capital.

If an Exchange has obtained a business license from OJK, it must have a paid-up capital of at least IDR1,000,000,000,000 or at least 2% of the value of transactions facilitated or reported to the Exchange, whichever is greater, within three months of the license issuance, and maintain a final capital balance of at least 80% of the paid-up capital.

  • A Clearinghouse must be a limited liability company. A Clearinghouse applying for a business license must have a paid-up capital of at least IDR 500,000,000,000 at the time of the initial application and maintain equity of at least 80% of the paid-up capital.
  • A Custodian must be a limited liability company, which may be established and owned by Indonesian citizens, Indonesian legal entities, foreign citizens, and/or foreign legal entities. A Custodian applying for a business license must have a paid-up capital of at least IDR250,000,000,000 at the time of the initial application and maintain equity of at least 80% of the paid-up capital.
  • A Dealer must be a limited liability company, which may be established and owned by Indonesian citizens, Indonesian legal entities, foreign citizens, and/or foreign legal entities. A Dealer applying for a business license must have a paid-up capital of at least IDR100,000,000,000 at the time of the initial application and maintain equity of at least IDR50,000,000,000.

Directors of DFA Platforms must apply to OJK for a licence and, once obtained, must comply with the obligations set forth in OJK Regulation No. 3 of 2024 on the Implementation of Financial Technology Innovation, as well as all applicable obligations related to the Financial Technology Innovation Provider Association (Asosiasi Penyelenggara Inovasi Teknologi Sektor Keuangan), anti-money laundering programs, prevention of terrorist financing and proliferation of weapons of mass destruction, consumer protection, implementation of anti-fraud strategies, and protection of personal data.

Fit and proper test

The Draft OJK Regulation complements the fit and proper test provisions in Bappebti Regulation No. 8 of 2021, which are not comprehensive. Key stakeholders in a DFA Platform, including controlling shareholders, directors, and members of the board of commissioners, must obtain approval from OJK before carrying out their roles and responsibilities. This approval is based on a fit and proper assessment under a separate OJK Regulation governing fit and proper tests for key stakeholders of financial services institutions, such as banking, capital markets, insurance companies, pension funds, venture capital, microfinance institutions, and other financial institutions.

Consumer protection

The Draft OJK Regulation addresses consumer rights and obligations, which are not covered in Bappebti Regulation No. 8 of 2021. A consumer is defined by the Draft OJK Regulation as any person who owns or uses products or services provided by Dealers. When Dealers terminate DFA trading activities, such as through a General Meeting of Shareholders’ decision, license revocation, or bankruptcy, they must settle all consumer rights and obligations. This includes either transferring consumers, their funds, and DFA to other Dealers, or returning funds and/or the DFA to the consumers. Dealers are fully responsible for any losses resulting from the termination of DFA trading activities. The imposition of administrative sanctions, such as the revocation of a Dealer's license by OJK, does not release the Dealer from its obligations to consumers.

Dealers must clearly and fully disclose information related to their activities, services, and products to consumers. Dealers are prohibited from marketing DFA products to the public through advertisements, except via official media of crypto asset trading companies. DFA Platforms must comply with consumer protection provisions under the laws and regulations governing consumer protection in the financial services sector.

Supporting business

DFA Marketplace activities may be supported by business activities that directly or indirectly benefit DFA Marketplace operators, such as liaison services related to payment service providers, DFA transaction facilitation services, and/or other activities approved by OJK. DFA Platforms are, however, prohibited from engaging in supporting business activities.

Supervision

OJK supervises DFA Platforms both directly and indirectly. Direct supervision involves examining trading operations, governance, and compliance with laws and regulations, while indirect supervision includes reviewing DFA Platforms’ reports.

Dispute resolution

The Draft OJK Regulation addresses dispute resolution similarly to Bappebti Regulation No. 8 of 2021. If a dispute arises between parties involved in DFA trading on the Marketplace, the parties must first attempt to resolve the issue through deliberation to reach a consensus within the timeframe specified in their agreement or as outlined in the OJK regulation on consumer protection. If consensus cannot be reached, the dispute may be resolved through the Exchange’s dispute resolution facilities, within the timeframe specified in the parties' agreement and/or the Exchange’s rules and regulations. Alternatively, the parties may refer the dispute to an Alternative Dispute Resolution institution or the District Court, depending on the dispute resolution forum specified in their agreement.

Transitional policy

When the Draft OJK Regulation comes into effect, the following futures entities under Bappebti will be renamed as follows: futures exchanges will become DFA Exchanges, futures clearinghouses will become DFA Clearinghouses, and crypto asset dealers will become DFA Dealers. The Draft OJK Regulation does not specify when futures custodians will become DFA Custodians.

The Draft OJK Regulation will come into effect following the transfer of regulatory and supervisory authority over DFA, including crypto assets, from Bappebti to OJK, which is expected no later than 10 January 2025. The Draft OJK Regulation does not revoke Bappebti Regulation No. 8 of 2021; however, since regulatory authority is shifting from Bappebti to OJK, Bappebti Regulation No. 8 of 2021 will no longer be valid.