A new Indonesian law that transfers crypto regulatory powers to the Financial Services Authority (OJK) from commodities watchdog CoFTRA indicates a shift in the country’s approach to policing the industry and an acknowledgement that there’s more to it than asset trading.
The law, signed by Indonesian President Joko Widodo on Jan. 12, is a financial regulations overhaul that modified at least 17 outdated local laws to align with technological developments. It could end up changing the country’s unique classification of crypto assets as commodities like gold or coal – something Widodo’s government was, just last year, hoping to leverage to benefit the local economy.
According to Indonesia’s blockchain trade association, ABI, the switch in regulators is a sign that the country sees promise in the technologies that underlie crypto, especially as the OJK will supervise the industry under its “Financial Sector Technological Innovation” measures.
“We must admit that this shift has shown a good understanding from the regulator that crypto assets are broader than just trading,” ABI Chair Asih Karnengsih wrote in a statement to CoinDesk.
Indonesia was one of 2022’s fastest-growing crypto markets, driven primarily by speculative trading. Last year, the country’s trade ministry recorded around 14 million crypto traders against 9 million stock traders.
Being treated as commodities has kept crypto out of the debate over which digital assets should be treated like traditional securities, something regulators and industry members in other economies like the U.S. are still arguing about.
“The shifting connotes that crypto assets may be treated similarly to securities and bring about the application of the whole array of securities-related requirements and restrictions in their offering, sales, market, and mutual funds,” Karnengsih said.
The government says regulatory changeover will take two years, said Jay Jayawijayaningtiyas, country manager for crypto exchange Luno Indonesia, adding that it’s too early to speculate how the assets will be regulated by the new authority. Luno is owned by CoinDesk’s parent company DCG, and is a member of the ABI.
The change in regulators – and the implication that the OJK’s scope will differ from the commodities regulator – could benefit the industry’s development, Karnengsih said.
For one, CoFTRA required exchanges operating in the country to submit periodic reports on transactions conducted on their platforms. In September, CoinDesk wrote about difficulties and delays faced by local token issuers to make it onto CoFTRA’s list of approved tokens. Now, the country will go ahead with plans to set up a national crypto exchange – complete with an index – similar to stock exchange platforms like NYSE, which is expected to make it easier for regulators to monitor market activities broadly.
“This centralized exchange will play a significant role in market [supervision] and development, especially in deciding the product offered by Exchangers,” Karnengsih said.
A government official told Bloomberg in early January that the exchange will be set up before the two-year transition period is up.
The OJK has yet to issue any guidance for crypto entities operating in the country.