Indonesia Strengthens Crypto Asset Regulation through UUP2SK Revision

Enhancing Regulatory Framework for Crypto Assets

The Indonesian government, in collaboration with the DPR (People's Representative Council), is currently revising the Financial Sector Development and Strengthening Law (UUP2SK) to bring crypto assets under a more robust regulatory framework. This move aims to strengthen the oversight of the Financial Services Authority (OJK) over the rapidly growing crypto asset market. According to Mukhamad Misbakhun, Chairman of DPR's Commission XI, the revision is expected to have a positive impact on the crypto asset industry by providing clearer regulations and better consumer protection.

Key Features of the Revised UUP2SK

1. Aggregated Liquidity: The new regulation proposes the aggregation of liquidity to create a deeper local order book, reducing dependence on global order books and potentially minimizing capital outflow.
2. Separation of Functions: The revised law will separate functions among different market participants, including exchanges, clearing houses, custodians, and Digital Financial Asset Traders (PAKD). This separation aims to prevent centralization and ensure that each entity has distinct roles and responsibilities.
3. Enhanced Transparency: The new framework will require clearer recording of transactions, including identification of parties involved in transactions and their funding sources. This measure is designed to improve transparency and reduce risks associated with crypto asset transactions.

Addressing Concerns and Industry Impact

Misbakhun addressed concerns about potential centralization and security risks by emphasizing that the revised UUP2SK maintains the spirit of decentralization through functional separation. He explained that the new regulations would ensure prudent governance and clear rules, thereby maximizing consumer protection. The proposed changes are expected to make the local crypto industry more competitive by consolidating liquidity and creating a robust local order book.

Implications for the Crypto Asset Market

The revision of UUP2SK represents a significant step towards recognizing crypto assets as legitimate financial assets in Indonesia. By bringing crypto assets under the OJK's supervision, the government aims to create a more secure and transparent market environment. This regulatory clarity is likely to attract more investors and enhance the overall stability of the crypto asset market in Indonesia.