Indonesia enacts new law reconfiguring supervisory powers in financial sector and mandating new initiatives
27 February 2023
On 15 December 2022, Indonesia passed a draft omnibus law on the financial sector. This law, known as the Financial Sector Development and Reinforcement (Pengembangan dan Penguatan Sektor Keuangan) Law (“P2SK Law”), was enacted on 12 January 2023 and reconfigures supervisory powers among different regulators over a number of sectors, among other changes. Many of the amendments seek to restore consumer confidence in the financial sector.
The P2SK Law mandates that supervisory authority over digital financial assets (including cryptocurrency) and securities-related financial derivatives will shift from the Commodity Futures Trading Regulatory Agency (“Bappebti”) to the Financial Services Authority (“OJK”). Oversight of financial derivatives related to the money market and foreign currencies market will now be undertaken by Bank Indonesia (“BI”), rather than Bappebti.
Under the P2SK Law, the Indonesia Deposit Insurance Corporation (“LPS”) will be required to guarantee insurance policies in addition to guaranteeing bank deposits.
The P2SK Law also mandates that BI develop and implement a central bank digital currency (CBDC), known in the country as “digital Rupiah”. Digital Rupiah is expected to support financial inclusion, the digital economy, and BI’s agenda to achieve interoperability and interconnection in domestic and cross-border payment systems.
The P2SK Law also stipulates that officers at BI, OJK, and LPS may not be affiliated with a political party.