Under the new rule, financial institutions must subject their products and services, including those in the crypto sphere, to scrutiny within the OJK’s Regulatory Sandbox. This initiative seeks to bolster the development of technological innovations in the financial sector and shield users from potential losses and fraudulent activities.

The mandate extends to banking, insurance, and crypto entities, ensuring that their offerings meet the standards of consumer suitability. Crypto firms, both new entrants and those already licensed by the OJK, will undergo evaluation within the regulatory sandbox before receiving authorization to operate in Indonesia.

Hasan Fawzi, Executive Head of the Supervisor of Financial Sector Technology Innovation, Digital Financial Assets, and Crypto Assets, emphasized the OJK’s commitment to consumer protection and education. He stressed the importance of regulatory mechanisms in preventing fraudulent investments, underscoring the significance of the regulatory sandbox in this endeavor.

The newly introduced rule by the OJK aims to bolster technological innovation within the financial sector while ensuring the safety of users against fraudulent activities and investment losses. Under this regulation, Financial Services Institutions (FSIs), including banking, insurance, and crypto companies, are required to submit their new products and services to Indonesia’s regulatory sandbox for evaluation.

The sandbox serves as a testing ground where these products and services undergo thorough scrutiny to ensure their suitability for consumer use. Hasan Fawzi, Executive Head of the Supervisor of Financial Sector Technology Innovation, emphasized the importance of consumer protection and education in this initiative. He stated, “We hope that all our regulatory mechanisms will be present and have a direct impact on the prevention of fraudulent investments.”

Failure to comply with this new requirement could result in companies being deemed unlicensed, rendering their products illegal. The regulatory sandbox functions as a mechanism to assess the reliability of business processes, models, and financial instruments, thereby promoting responsible innovation with appropriate risk management practices.

This move marks a significant shift in Indonesia’s regulatory landscape for crypto assets. Notably, supervision and regulation of these assets will transition from the Commodity Futures Trading Regulatory Agency (Bappebti) to the OJK by 2025. Fawzi highlighted the sandbox as a crucial tool for familiarizing organizers and practitioners in the digital finance sector with OJK regulations, ultimately facilitating a smoother transition.

Non-compliance with the new requirement will result in unauthorized operation, rendering the product illegal in Indonesia. The regulatory sandbox serves as a crucial testing ground, assessing the reliability of business processes, models, and financial instruments, while promoting responsible innovation and risk management.

This latest development marks a significant shift in Indonesia’s regulatory landscape concerning crypto assets. Notably, supervision and regulation of these assets will transition from the Commodity Futures Trading Regulatory Agency (Bappebti) to the OJK by 2025.

According to Fawzi, the regulatory sandbox serves as a valuable tool for familiarizing organizers and practitioners in the crypto asset digital finance space with OJK regulations. Simultaneously, it enables the OJK to introduce effective regulation and supervision, ensuring compliance and consumer protection.

Despite previous criticisms of Indonesia’s regulatory approach to cryptocurrencies, the country boasts one of the highest adoption rates globally. The market saw a notable increase in investors, with over 18.51 million reported by Bappebti in 2023, indicating a 9.8% growth by February 2024.

However, challenges such as dual taxation and restrictions on direct crypto payments for goods and services have prompted concerns among industry stakeholders. Local exchanges have voiced apprehensions about high taxes potentially deterring user activity within licensed platforms.

In light of these developments, Indonesia continues to navigate the delicate balance between fostering innovation and ensuring regulatory compliance in the crypto sphere. With the implementation of the regulatory sandbox and forthcoming regulatory transitions, the country aims to strengthen its position in the global crypto landscape while safeguarding the interests of consumers.