With the continued rapid growth of the financial technology sector, the government has been reforming its licensing regime to provide business opportunities while also protecting local interests
Many changes occurred in Indonesia in the past year, from the first case of covid-19 in early March, to the issuance of Law No. 11 of 2020 on Job Creation, commonly known as the Omnibus Law, in late 2020. The law will amend and revoke approximately 76 laws and regulations, including fintech regulation. This article discusses the relevant updates on fintech regulation in Indonesia.
On 11 December 2020, Indonesia’s financial services authority, Otoritas Jasa Keuangan (OJK) enacted OJK regulation No. 57 on securities crowdfunding (POJK 57), revoking a previous regulation in 2018 on equity crowdfunding. In general, POJK 57 expands the scope of crowdfunding to include equity securities in shares and other types of securities, such as debt securities and sukuk, or other convertible equity. Significantly, POJK 57 now allows Indonesian non-legal entities – as opposed to only Indonesian limited liability companies in the 2018 regulation – to participate as issuers. It brings an opportunity for small and medium-sized enterprises and startups to acquire a new source of income.
Peer-to-peer (P2P) lending
The country’s P2P business is covered in OJK regulation No. 77 on information technology-based lending (POJK 77). On 13 November 2020, the OJK published a draft of its regulation on P2P, which is planned to replace POJK 77, to provide more legal certainty on the P2P business model and protect the public interests. Some of the provisions in the draft are adopted from the existing OJK’s regulations in other heavily regulated business sectors such as insurance, securities, and multi-finance. According to the draft, the maximum loan granted by a lender, including a super lender and its affiliates, would be limited to 25% of the total annual outstanding loan.
On 29 December 2020, the central bank, Bank Indonesia, issued a Bank Indonesia regulation, Peraturan Bank Indonesia (PBI) No. 22 on payment system (PBI 22), which is effective from 1 July 2021. The reform is intended to change the payment system regulatory framework from an institutional approach to an activity and risk-based approach. Under PBI 22, payment system providers are classified into:
- Payment services provider, or penyedia jasa pembayaran (PJP). These are banks or non-bank institutions that offer services in facilitating payment transactions to users such as account information services, payment initiation and/or acquiring services, account issuance services, and/or remittance services. A PJP company must obtain a licence from Bank Indonesia;
- Payment system infrastructure provider, or penyelenggara infrastruktur sistem pembayaran (PIP). These are parties that provide infrastructure for transferring funds and carry out clearing and/or final settlement. A PIP company must obtain a so-called appointment from the central bank.
PBI 22 also introduces foreign direct investment restrictions. PJP business is open to 85% foreign shareholding, provided that at least 51% of shares with voting rights, management control and veto rights are held by Indonesian shareholders. PIP business is only open to 20% foreign shareholding, provided that at least 80% of shares with voting rights, management control and veto rights are held by Indonesian shareholders. The calculation of the shareholding participation will be traced up to the ultimate beneficiary of the shareholders.
Crypto assets have been acknowledged as a commodity in Indonesia through the issuance of Ministry…