Keeping Up with the Crypto: 3 New Changes on Indonesia’s Crypto Asset Landscape

The end of 2022 has proven to unpack a lot of surprises for the Crypto Industry. It began with the Commodity Futures Trading Regulatory Agency (“CFTRA”)’s moves of lifting the Crypto Exchange Provider (“CEP”) moratorium and the shifting of authority on crypto supervision from the CFTRA to the Financial Services Authority / Otoritas Jasa Keuangan (“OJK”), the government financial industry supervisor. To add more surprises, the Indonesia Central Bank also rolled out its plan to implement Digital Rupiah, Indonesia’s first-ever Central Bank Digital Currency (“CBDC”).

Amendment to the CFTRA Regulation

Indonesia has just amended the Commodity Futures Trading Regulatory Agency Regulation No. 3 of 2022 on Amendment to Commodity Futures Trading Regulatory Agency Regulation No. 8 of 2021 on Guidelines for the Implementation of Crypto Asset Physical Market Trading on the Futures Exchange (“CFTRA 3/2022”).

The CFTRA 3/2022 also officially lifted the Crypto Exchange Provider License (“CEP License”) moratorium. To put it simply, Indonesia is now open to new entities applying for a CEP License and operating their business in Indonesia. Nonetheless, similar to the previous regulation, the CFTRA still does not issue any license to a foreign entity unless it opens a local entity in Indonesia.

Several fundamental changes have also been made under the CFTRA 3/2022, which are as follows:

• Paid-up Capital: the amount of paid-up capital has now increased from IDR 80,000,000,000 to IDR 100,000,000,000.

• Equity: the amount of equity that must be maintained is at least IDR 50,000,000,000.00, which was previously a minimum of 80% of the paid-up capital.

• Domestic investment: a prospective CEP or CEP may own up to 20% (twenty percent) of another prospective CEP or CEP’s shares. Such ownership must be reported to the Head of the CFTRA.

• Foreign investment: share ownership through foreign investment by a CEP with the same business model or activities as the prospective CEP or CEP may only be exercised in 1 (one) Prospective CEP or CEP.

• Report submission: submit periodic reports, business plan reports, and business plan achievement reports to the CFTRA.

• Board of Directors: prospective CEP or CEP must have at least 3 (three) members of the board of directors, of which 2/3 (two-thirds) of them must be Indonesian citizens and domiciled in Indonesia. Additionally, the president director must be an Indonesian citizen.

• Board of Commissioners: prospective CEP or CEP must have at least 2 (two) members of the board of commissioners, of which 2/3 (two-thirds) of them must be Indonesian citizens and domiciled in Indonesia.

The above changes provide more clarity for CEP investment, especially foreign investment. CFTRA 3/2022 creates an avenue for foreign CEP to operate in Indonesia by allowing them to acquire shares of a local prospective CEP or established CEP. This move certainly sets to entice foreign investors to expand their business operations in Indonesia and develop Indonesia’s crypto asset industry.

Shifting of Authority for Crypto Asset

Further, a shift in the crypto asset industry will soon begin with the passing of the Law on Development and Strengthening of the Financial Sector by the House of Parliament and the Indonesian Government. Through the law, several existing regulations in the financial sector are planned to be revised, including regulation on crypto asset.

Under the new law, crypto asset will no longer be regulated and supervised under the CFTRA. Instead, the role will fall into the hands of the OJK. This new law mandates OJK to form a Board of Commissioners, which consists of the Chief Executive Superintendent of Financial Sector Technology Innovation, Digital Financial Assets, and Crypto Assets. Such a position will be responsible for supervising crypto asset-related activities in Indonesia.

The complete transfer of regulatory and supervisory functions from the CFTRA to OJK must be completed within 24 (twenty-four) months and regulated in a Government Regulation which must be enacted no later than 6 (six) months after the promulgation of this new law.

Introduction to Digital Rupiah

In addition, Bank Indonesia comes to be the new kid on the crypto-block. With its effort to develop its own digital currency (or Central Bank Digital Currency/CBDC), the Indonesian monetary regulator will issue its own CBDC (i.e., Digital Rupiah). Although it is still a work in progress, many believe that the Digital Rupiah will impact the cryptocurrency industry, especially since Digital Rupiah is expected to have a less volatile price surge and better clarity on its legal protection due to its centralised nature.

All the above changes, especially the new regulations, will likely to create Indonesia’s crypto-asset landscape more competitive and provides clarity for the public. However, due to the rapid growth of the crypto-asset industry, it always feels like a never-ending game of catch and release, one that is worth to be kept up with. If you want to understand more on crypto asset in Indonesia and other related matters, feel free to reach us via email at danny.kobrata@kk-advocates.com or office@kk-advocates.com.