Conventus Law: What impact has the new law had on Indonesia’s financial sector regulatory landscape?
Metalaw: The new law overhauls the financial sector regulations in Indonesia as it amended most of regulations concerning the financial sector, among others banking, capital market, insurance, financial technology, and currency law.
Can you tell us about some of the key changes brought about by the new law?
The new law amends 16 laws concerning the financial sector in Indonesia. In addition to the amendment, the new law also regulates some new matters, among others the existence of digital rupiah and bullion activities in Indonesia. Another change that is also noteworthy is the transfer of supervising authority for the crypto-asset transaction. The crypto-assets were previously under the authority of the Commodity Futures Trading Regulatory Agency (“Bappebti”) but were repositioned to fall within Financial Services Authority (“OJK”) control. The New Law stipulates a two-year transition for the full transfer.
Finally, to incentivise the setting up of VCCs, MAS had introduced the VCC Grant Scheme, effective 16 January 2020, under which MAS would co-finance up to 70% of qualified expenditures paid to Singapore-based service providers up to a cap of S$150,000. The VCC Grant Scheme expired on 15 January 2023 and there has been no indication that it will be extended beyond this date.
“(…) the new law incorporates criminal sanctions for the violation of ITSK regulation”
What is the purpose of the new law?
The government states that the new law aims to encourage the contribution of the financial sector to be inclusive, sustainable and foster fair economic growth to improve people’s lives, reduce economic inequality, and realize a prosperous, advanced and dignified nation.
How will the new law impact financial technology companies in Indonesia?
In addition to the changing of the supervising authority of crypto assets, which may result in further amendments to crypto regulations under the OJK’s authorities, the new law also regulates Financial Sector Technology innovation (ITSK). This is not a new thing as this has been previously regulated under the OJK regulation and BI regulation, which was known as a regulatory sandbox. However, the new law incorporates criminal sanctions for the violation of ITSK regulation, i.e., operating ITSK activities without any license. These sanctions are aimed at shutting down the operation of unlicensed (illegal) financial technology companies.
“ (…) financial institutions and companies may face difficulties in implementing the regulations under the new law, especially if the new law does not provide a clear guideline on the implementation. ”
What are some of the potential challenges facing financial institutions and companies as a result of the new law?
Some of the regulations in the new law state that the implementation of the regulation will be further regulated under implementing regulations. Since the new law amends many laws and regulations, we believe it would take some time before the OJK can fully issue the implementing regulations. Therefore, financial institutions and companies may face difficulties in implementing the regulations under the new law, especially if the new law does not provide a clear guideline on the implementation.
For Further Information, Please Contact:
MetaLAW, Legal Consultant, Jakarta, Indonesia