INDONESIA Law and Practice Contributed by: Emir Nurmansyah, Monic N. Devina, D. Meitiara P. Bakrie and Nesya Ashari, ABNR Counsellors at Law
ups to drive growth in the use of blockchain. Some other major banks are reportedly pursuing routes to blockchain adoption, including the potential to use blockchain for KYC shared storage on blockchain. The authors believe that the leveraging of blockchain technology by traditional players – particularly in some aspects of settlements, KYC and financial inclusion – will become more prevalent to keep up with block - chain technology. 10.2 Local Regulators’ Approach to Blockchain There has yet to be a specific rule proposal, let alone legislation, that governs blockchain adoption, although the government continues to welcome this through its technology-neutral approach in general. Within the financial sector, as mentioned in 10.1 Use of Blockchain in the Financial Services Industry , the BI has formulated Project Garuda, for which a White Paper was released on 30 November 2022. The digital rupiah will be developed in three stages – immedi - ate state, intermediate and end-state – and will run on a permitted blockchain network. The three-stage approach will create the digital rupiah as a wholesale CBDC (w-CBDC or w-digital rupiah cash ledger), a more-advanced w-CBDC (w-digital rupiah cash and securities ledger) and retail digital rupiah (r-CBDC). The W-digital rupiah (initial stage) will include CBDC issuance, redemption and transfer, including integra - tion with the BI real-time gross settlement (RTGS) system. The second stage – ie, a more-advanced w-CBDC – will take the digital rupiah as a means of settlement of securities transactions via central coun - terparties (CCP) as well as tokenisation of securities. In the final stage, the digital rupiah will become an r-CDBC to be distributed to retail users, including for distribution and collection, P2P transfer, and pay - ments. Notwithstanding the foregoing, by virtue of the con - solidated law within the financial sector, Law 4/2023, Indonesia now permits smart contracts as a form of contract for transactions in capital markets, money markets and foreign exchange (forex) markets, includ - ing derivatives transactions. Law 4/2023 further clari - fies that smart contracts, or their printouts, can be
used as legal evidence, as will be further stipulated in the law on information and electronic transactions. The use of smart contracts must be followed by stor - age of such contracts, which must at least contain terms and conditions concerning the automation of rights and performance of obligations based on a smart contract; such a contract is used as a frame - work agreement that contains natural language to underpin automation of rights and performance of obligations in smart contracts. In other words, the use of smart contracts in the financial sector is an alternative to traditional contracts, since the contract is agreed upon in natural language, but the obligations are performed by code (program). Law 4/2023 further states that smart contracts will be subject to the OJK implementing regulations, in accordance with the law on information and electronic transactions. The OJK has been embracing the use of blockchain, as seen in the identification of blockchain-based fin - tech companies as a fintech cluster. Also, the OJK envisages blockchain-based technology as an aid for securities’ crowdfunding in data exchange. 10.3 Classification of Blockchain Assets Law 4/2023 mandates the shift of authority and super - visory duties over digital financial assets (including crypto-assets), as well as other financial derivatives, from Bappebti to the OJK. As a result of the shift of regulatory and superviso - ry authority from Bappebti to the OJK, blockchain or crypto-assets are recognised as digital financial assets. This shift signifies that crypto-assets are no longer being classified as tradable commodities under the supervision of Bappebti. Crypto-assets may only be traded through a crypto- asset exchange supervised by the OJK or futures exchange licensed under Bappebti before the author - ity shifted to the OJK. The assets shall also be listed in the white list, which will be updated from time to time and maintained by the exchange.
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