The Financial Services Authority (OJK) is Indonesia’s regulatory body overseeing the financial services sector, including banking, capital markets, insurance, pension funds, and other financial institutions. Its main role is to maintain financial system stability, protect consumers, and foster a healthy financial environment through effective regulation and supervision.
OJK has launched the 2024-2028 Roadmap for the Development and Strengthening of Financial Sector Technology Innovation, Digital Financial Assets, and Crypto Assets. This roadmap aims to encourage innovation in the financial services sector while mitigating risks that arise alongside technological advancements. OJK is committed to strengthening governance and regulatory frameworks for digital assets, ensuring consumer protection, maintaining financial stability, and supporting the development of secure and sustainable infrastructure. Increasing financial literacy and inclusion for the public is also a key focus, along with cross-sector cooperation to build a robust digital asset ecosystem.
In the face of global challenges and the development of financial technology, Indonesia has a significant opportunity to leverage blockchain as a future strategy in the financial sector. One promising opportunity is the development of a carbon exchange, which has substantial potential due to Indonesia’s natural wealth. Indonesia has tropical rainforests, mangrove forests, and peatlands capable of absorbing large amounts of carbon emissions. The potential additional revenue from selling carbon credits is enormous. This statement comes from President Prabowo Subianto’s economic advisor, Hashim Djojohadikusumo, delivered at the Economic Dialogue of the Indonesian Chamber of Commerce and Industry (Kadin) at Menara Kadin, Jakarta, on Wednesday (23/10/2024). According to reports and studies by the United Nations (UN), Indonesia’s forests could offer 577 million to 600 million tons of carbon credits. These credits can be offered for purchase by major emitting countries, such as Saudi Arabia, Qatar, and the United Arab Emirates.
The potential of the carbon market is further reinforced by Indonesia’s vast natural resources. The tropical rainforests, covering 125.9 million hectares, have the potential to absorb 25.18 billion tons of carbon emissions (Source: Coordinating Ministry for Maritime Affairs and Investment), while mangrove forests covering 3.31 million hectares can absorb 33 billion tons of carbon (Source: Coordinating Ministry for Maritime Affairs and Investment), and peatlands covering 7.5 million hectares can absorb 55 billion tons of carbon (Source: Coordinating Ministry for Maritime Affairs and Investment). The economic potential of carbon trading is estimated to reach IDR 350 trillion over the next five years (Source: Indonesia Carbon Trading Handbook – Katadata), while the emission reduction target from the forestry sector by 2030 is -140 million tons of CO2e (Source: Carbon Trading for Achieving NDC Targets, Indonesia’s Contribution to the Global Climate Change Agenda – ppid@menlhk). Throughout 2023, carbon trading transactions in the power generation subsector reached IDR 84.17 billion, with total carbon transactions amounting to 7.1 million tons of CO2 equivalent (Source: 2023 Carbon Trading Transactions Reach IDR 84 billion – Ministry of Energy and Mineral Resources).
In addition, Indonesia can learn from China in establishing a National Blockchain Technology Innovation Center to enhance innovation, industrial efficiency, and technological sovereignty. China has successfully built a sandbox center for general blockchain innovation, but OJK can adopt this approach more specifically for digital asset innovation, such as Non-Fungible Tokens (NFTs), Central Bank Digital Currency (CBDC), real asset tokenization, DeFi, and virtual assets in the metaverse. Despite having strict regulations on cryptocurrency, China continues to focus on developing blockchain technology to strengthen its position as a global leader. A similar approach in Indonesia could help reduce dependence on foreign technology and transform industrial sectors with blockchain solutions tailored to domestic needs. If implemented effectively, this could serve as a benchmark for other Global South countries on how to develop financial inclusion in alignment with global ESG narratives. Such innovation is unlikely to emerge in developed countries where financial systems are already mature.
The development of a Central Bank Digital Currency (CBDC) is also a crucial step in the context of the BRICS global narrative to establish a more independent digital financial system. The experiences of India and China in implementing CBDCs can serve as valuable lessons for Indonesia. Cooperation between OJK and Bank Indonesia (BI) will be essential to ensure that CBDCs support national economic stability and strengthen Indonesia’s position in the global digital financial ecosystem. OJK is responsible for formulating regulations to protect consumers and maintain financial system stability, while BI is responsible for the technical aspects of issuing and operating CBDCs, ensuring integration with existing payment systems, and educating the public.
Moreover, blockchain and DeFi technology have enormous potential to improve financial inclusion. Data from OJK’s 2022 National Financial Literacy and Inclusion Survey (SNLIK) showed that financial inclusion in Indonesia reached 85.10%, up from 76.19% in 2019. However, about 14.90% of the population remained unbanked in 2022. Currently, the traditional financial system makes it difficult for the lower class to access affordable loans due to perceived high risks. By leveraging transparent and inclusive blockchain-based crowdfunding, people in remote areas can more easily access funding. This could be Indonesia’s “Great Leap,” similar to the vision of Deng Xiaoping, to improve welfare and eradicate poverty.
The case study of Tala in Kenya, the Philippines, Mexico, and India shows how blockchain technology can be used to improve access to financial services. Tala is a digital lending platform that uses blockchain technology to provide microloans to unbanked individuals in developing countries. Tala uses alternative data, such as mobile app usage history, to assess creditworthiness. To date, Tala has provided loans to more than 9 million people worldwide, helping them meet financial needs and improve their standard of living. Tala operates in four countries across three continents and has disbursed $4.5 billion in credit.
To ensure a sustainable future, OJK must focus on these initiatives to promote innovation aligned with global trends, enhance the competitiveness of the national financial sector, and safeguard technological sovereignty. However, significant challenges remain, including the lack of adequate digital infrastructure, low financial literacy in some segments of society, and regulatory limitations that must continue to be refined to balance innovation with consumer protection. Resistance to change among traditional financial institutions also poses obstacles that need to be addressed. Nevertheless, if these strategic steps are well implemented, Indonesia will not only be a participant but also a leader in developing a digital financial ecosystem that is inclusive, sustainable, and sovereign, setting an example for other developing countries facing similar challenges.
