The rapid digitalization of the financial sector has led to many innovations in the economic system, resulting in new products, services, and business models.
Increasing the number of retail investors in the financial technology (fintech) industry also requires regulatory frameworks that can protect consumers, encourage growth and innovation, and advance Indonesia’s economy.
This is addressed in Law No. 4 of 2023 concerning the Development and Strengthening of the Financial Sector (UU P2SK), which is part of the Indonesian government’s efforts to strengthen the financial system.
UU P2SK includes several provisions related to fintech, now referred to as Financial Sector Technology Innovation (ITSK). For the first time, it provides for the nomenclature of digital financial and crypto assets.
In response to regulatory developments, the UGM Center for Southeast Asian Social Studies (PSAP UGM) shared its study, “Policy on Retail Investment Innovation Based on Digital Financial Assets in Indonesia,” on Monday (Jun. 10).
The event was held in person and online, featuring participants from the Financial Services Authority (OJK), Commodity Futures Trading Regulatory Agency (Bappebti), Bank Indonesia (BI), Parliamentary Expertise Agency, Fiscal Policy Agency, Indonesian Crypto Asset Trade Association (Aspakrindo), and the Indonesian Fintech Association (AFTECH).
This study is part of efforts to support strengthening the national fintech industry’s competitiveness by providing recommendations to create a conducive policy ecosystem for developing the digital financial asset industry.
The study, which analyzed the substance of UU P2SK in depth and compared it with digital financial asset regulation policies in five countries, found the need to map definitions and the scope of digital financial assets.
According to Professor Paripurna Sugarda, Head of the PSAP UGM Study Team, mapping the definition of the term ‘digital financial assets,’ including the position of crypto assets within this term, is crucial to prevent regulatory overlap and clarify the authority and responsibilities of institutions governing and supervising digital financial assets.
“Considering the institutional shift related to digital financial assets mandated by UU P2SK, defining digital financial assets needs to be clarified so that policy-making and regulation implementation have clearly defined subjects. This should be a consideration for various stakeholders to ensure that the upcoming derivative regulations can benefit the ecosystem,” explained Professor Sugarda.
Through a survey of 452 respondents about their experiences with retail investment based on digital financial assets, the study also identified the importance of design and development processes that consider user needs, oversight to maintain a level playing field among industry players in marketing, and cooperation between regulators and companies to maintain consumer trust.
Claudia Kolonas, Head of the Asset Management Department at the Indonesian Fintech Association (AFTECH), emphasized the industry’s commitment to promoting increased retail investment based on digital financial assets in Indonesia.
“The role of digital financial assets in the economy is becoming more evident, especially as an investment tool for the general public. Therefore, AFTECH appreciates the study by PSAP UGM as consideration for regulators and other relevant stakeholders to facilitate the development of the ITSK and digital financial asset industry ecosystem in Indonesia to grow well and provide maximum benefits for the national economy,” said Kolonas.
The study underscores the importance of close collaboration to create a competitive and secure retail investment ecosystem based on digital financial assets. With precise mapping and adaptive regulations, Indonesia’s digital financial asset industry has the potential to grow and innovate, contributing positively to the national economy.
This study’s recommendations are expected to help create a conducive ecosystem for developing digital financial asset innovation in Indonesia.
Reportage: UGM Center for Southeast Asian Social Studies