Indonesia Financial Services Authority sets out framework for trading of digital financial assets in new regulation

21 January 2025

On 10 January 2025, Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan (“OJK”)) Regulation No. 27 of 2024 on Trading in Digital Financial Assets, Including Crypto Assets (“OJK Regulation No. 27” or “Regulation”) came into force. It transitions the regulatory and supervisory duties for digital financial assets (“DFA”), 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 is mandated by Financial Law No. 4 of 2023 (“Financial Law”) to ensure the stability of the digital financial asset trading ecosystem in accordance with international financial services standards and best practices.

OJK Regulation No. 27 sets out the framework for trading in DFA and includes provisions relating to the institutions, licensing, governance, trading mechanisms, consumer protection, and personal data protection for DFA platforms.

This article provides an overview of the Regulation.

Digital financial assets

The Financial Law stipulates that OJK regulates and supervises all DFA, which is defined in the Regulation 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 provides DFA trading transaction settlement services and guarantees the settlement of DFA trading transactions. A Clearinghouse under OJK replaces a futures clearinghouse under Bappebti.
  • A DFA Custodian (“Custodian”) is a business entity licensed by OJK to manage 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.
  • Other parties as determined by OJK, including those involved in DFA trading based on the results of the OJK sandbox.

The Regulation sets out the following criteria that must be met for DFA to be traded on the Marketplace via DFA platforms:

  • DFA must be issued, stored, transferred, and/or traded using distributed ledger technology (“DLT”), including blockchain, or other similar technology;
  • DFA are not financial assets electronically recorded by financial services institutions, such as bank account balances displayed on websites and/or mobile banking applications, as well as securities stored and administered by the Central Securities Depository (Lembaga Penyimpanan dan Penyelesaian) in the capital market sector;
  • DFA may not be procured and/or used for activities that violate applicable laws and regulations; and
  • Other criteria set by OJK, including specific DFA that may arise in the future due to technological developments and other factors.

Unlike Bappebti Regulation No. 8 of 2021 on Guidelines for Crypto Asset Futures Trading on Exchange (“Bappebti Regulation No. 8”) that generally defines crypto assets as intangible commodities in digital form (meaning they can be either a financial or a non-financial asset), OJK Regulation No. 27 specifically stipulates that it is only applicable to DFAs, a term which also includes crypto assets.

OJK Regulation No. 27 stipulates that it does not regulate the initial offering of DFA, including initial coin offerings and/or initial token offerings.

Crypto assets

OJK Regulation No. 27 provides a more detailed and comprehensive definition of a crypto asset than Bappebti Regulation No. 8. OJK Regulation No. 27 defines a “crypto asset” as a digital representation of value that can be stored and transferred using DLT 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 a Marketplace must serve as a native digital representation of value (“digital native”), operate on a publicly accessible DLT or blockchain network, possess intrinsic utility or be backed by underlying assets, be traceable and not contain features designed to obfuscate ownership or transaction data, and have undergone an evaluation process based on the methodology applicable to the relevant Exchange.

The inclusion of digital natives and incorporation of an evaluation based on an Exchange’s methodology is an expansion of the criteria in Bappebti Regulation No. 8.

Crypto asset list

Exchanges must establish a list of crypto assets. DFA Platforms are prohibited from trading crypto assets other than those listed. OJK Regulation No. 27 provides that the crypto asset list published by Bappebti remains valid until Exchanges establish a crypto asset list. As of 9 January 2025, Bappebti Regulation No. 1 of 2025 on Crypto Asset List Traded on Crypto Asset Markets stipulate a total of 1,396 crypto assets that can be traded through DFA Platforms.

Licensing

DFA Platforms may operate after obtaining a business licence from OJK. Directors of prospective DFA Platforms must apply to OJK in writing for a licence and comply with specific requirements dependent on the type of entity as set out below through OJK’s SPRINT licensing system.

Licence applicant

Criteria

Exchange

·         Must be a limited liability company established by at least 11 unaffiliated business entities in the form of limited liability companies that have been engaged in trading eligible DFA for at least three years;

·         Have a paid-up capital of at least one trillion Indonesian Rupiah (“IDR”) (approximately S$84 million) at the time of the initial application; and

·         Maintain equity of at least 80% of this paid-up capital.

Clearinghouse

·         Must be a limited liability company;

·         Have a paid-up capital of at least IDR500 billion (approximately S$42 million); and

·         Maintain equity of at least 80% of this paid-up capital.

Custodian

·         Must be a limited liability company;

·         Have a paid-up capital of at least IDR250 billion (approximately S$21 million); and

·         Maintain equity of at least 80% of this paid-up capital.

Dealer

·         Must be a limited liability company;

·         Have a paid-up capital of at least IDR100 billion (approximately S$8 million); and

·         Maintain equity of at least 80% of this paid-up capital.


In addition to complying with OJK Regulation No. 27, DFA Platforms must comply with OJK regulations on 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

OJK Regulation No. 27 supplements the fit and proper test provisions in Bappebti Regulation No. 8, 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 as set out under a separate OJK regulation governing fit and proper tests for key stakeholders of financial services institutions.

Consumer protection

OJK Regulation No. 27 addresses consumer rights and obligations, which are not covered in Bappebti Regulation No. 8. A consumer is defined in the Regulation as any person who owns and/or uses products and/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.

Dealers must clearly and fully disclose information on their activities, services, and products to consumers in a manner that is clear, complete, accurate, honest, easily accessible, and not misleading as required under the OJK regulation on consumer protection.

Supporting business

DFA Marketplace activities may be complemented by supporting business activities, such as liaison services related to payment service providers, DFA transaction facilitation services, and/or other activities approved by OJK. However, DFA Platforms are prohibited from working with supporting business activities that have not yet been approved by OJK and/or engaging in such activities themselves. For example, a Dealer may not act as a payment service provider.

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 the review, analysis, and evaluation of DFA Platforms’ reports, data, information, and supporting activities.

Implementing regulations

OJK Regulation No. 27 states that several provisions will be further regulated by OJK, including fit and proper tests for key stakeholders of DFA Platforms, business plans for DFA Platforms, and periodic reporting by DFA Platforms.

Transitional policies

The following policies are set out in OJK Regulation No. 27 to address issues relating to the transition from Bappebti to OJK:

  • Licenses, approvals, product registrations, instruments, activities, and other decisions and/or decrees related to crypto assets issued by Bappebti prior to 10 January 2025, the effective date of OJK Regulation No. 27, remain valid. Crypto assets currently being processed by Bappebti will continue to be processed by OJK under OJK Regulation No. 27.
  • In addition to the products that are already registered under the crypto asset list, any other instruments and/or activities related to DFA that have not yet obtained licences, approvals, registrations, decisions, and/or other decrees, remain tradeable. However, an application for approval for the said instruments and/or activities must be submitted to OJK no later than one month after the effective date of OJK Regulation No. 27 of 2024.
  • Futures entities engaged in crypto asset trading under Bappebti that have the relevant business licences, approvals, registration certificates, decisions, and/or other decrees from Bappebti are deemed to hold the corresponding business entity licence as set out in OJK Regulation No. 27. For example, futures exchanges are deemed to have business licences as Exchanges and futures clearinghouses are deemed to have business licences as Clearinghouses, and so on.
  • Supporting business activities that have obtained business licences, approvals, registration certificates, decisions, and/or other decrees from Bappebti are deemed to be registered as DFA supporting business activities.
  • Examinations of crypto assets being conducted by Bappebti are to be transferred to OJK.
  • Disputes and investigations related to DFA cases that were being handled by Bappebti before the transition of regulatory and supervisory duties will continue to be handled by Bappebti.

OJK Regulation No. 27 does not expressly revoke Bappebti Regulation No. 8. However, since regulatory authority is shifting from Bappebti to OJK, Bappebti Regulation No. 8 will no longer be valid.

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