Legal News Update
Contributors: Almaida Askandar, S.H., MBA, Nita Damayanti, S.H., and Rania Adhara Safira, S.H.
Published on 14 August 2026 by IABF Law Firm, Jakarta, Indonesia.
Indonesia Strengthens Its Financial Sector Framework: Key Changes under Law No. 4 of 2026 Overview
On 17 June 2026, Indonesia enacted Law No. 4 of 2026 on the Amendment to Law No. 4 of 2023 on Financial Sector Development and Strengthening (“Law 4/2026”), which took effect on the same date. The new law refines the financial sector reforms introduced under Law No. 4 of 2023 (“Law 4/2023”), with a particular focus on institutional oversight, financial stability and the regulation of emerging financial activities. Law 4/2026 recalibrates the roles of Indonesia’s principal financial authorities, including Bank Indonesia (“BI”), the Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) and the Indonesia Deposit Insurance Corporation (Lembaga Penjamin Simpanan or “LPS”). It also responds to developments in the digital economy by bringing digital financial assets, crypto assets and certain new market activities more clearly within the financial regulatory framework.
Key Changes
1. Expanded OJK Regulatory Perimeter
Law 4/2026 broadens and clarifies OJK’s regulatory and supervisory mandate. In addition to its existing responsibilities across banking, capital markets, insurance and other financial services, OJK’s remit now expressly covers financial sector technology innovation, digital financial assets and crypto assets, carbon exchanges, mineral and strategic commodity exchange activities, and market conduct. The amendments also extend OJK’s authority in insolvency proceedings. OJK is authorised to file bankruptcy and suspension of debt payment obligation (penundaan kewajiban pembayaran utang or “PKPU”) petitions in respect of specified entities under its supervision, including crypto-asset traders and exchanges, digital or crypto-asset custodians, and issuers of crypto and other digital financial assets.
2. Clearer Framework for Digital and Crypto Assets
Law 4/2026 provides greater statutory recognition of institutions operating in the digital financial asset sector. It introduces specific definitions for financial services institutions conducting activities involving crypto assets and other digital financial assets. Together with the regulatory framework contemplated under Article 221A, these changes reinforce the transition of crypto and digital financial asset activities into OJK’s broader financial services supervisory architecture. Businesses active in the issuance, trading, exchange or custody of such assets should therefore consider the implications for their regulatory classification and compliance obligations.
3. Strengthening the Authority of the Indonesia Deposit Insurance Corporation (LPS)
Article 7 broadens the mandate and authority of the Indonesia Deposit Insurance Corporation (LPS). In addition to its existing role in bank resolution, LPS is now empowered to undertake resolution measures for insurance and sharia insurance companies. In carrying out this expanded mandate, LPS may formulate, establish, and implement resolution preparations, conduct due diligence, and execute resolution measures for insurance companies experiencing financial distress or failure.
The amendments further strengthen LPS’s role in dealing with distressed insurance and sharia insurance companies. LPS is empowered to prepare and implement resolution measures, conduct due diligence and execute resolution policies for insurance companies experiencing financial difficulties or failure. Notably, Article 22A provides a clearer framework for determining whether an insurance company under resolution should be rescued. The decision may take into account the estimated costs and effectiveness of the available resolution options, providing a more structured basis for insurance resolution decisions.
4. OJK Investigative Authority and Restorative Justice
Articles 278C(12)–(15) clarify that OJK investigators must conduct investigations in accordance with the Indonesian Criminal Procedure Code (KUHAP) and under the coordination and supervision of the Indonesian National Police (“POLRI”), including the submission of investigation results and case files through POLRI to the public prosecutor. In addition, Articles 278F–278O introduce a restorative justice mechanism for financial-sector offences, applicable at the investigation, prosecution, and trial stages, in alignment with Indonesia’s new Penal Code (Law No. 1 of 2023).
5. Demutualization and Restructuring of the Indonesia Stock Exchange (IDX)
Article 8 reforms the institutional structure and ownership of the Indonesia Stock Exchange (IDX/BEI). Instead of operating under a membership-based (mutual) and non-profit framework, the IDX is transitioned into a demutualized, profit-oriented limited liability company. This restructuring aims to strengthen governance, boost investor confidence, and broaden stakeholder participation in the Indonesian capital market. In executing this demutualization, the IDX is enabled to act with greater agility in response to rapid global developments, attract major investors to advance the exchange, and potentially transition into a publicly traded company.
6. Legal Protection and Institutional Accountability
Law 4/2026 introduces express legal protection for relevant officials, governing body members and employees of BI, OJK and LPS, provided that they perform their statutory duties in good faith and in accordance with applicable laws and regulations. At the same time, the law reinforces institutional accountability by allowing the House of Representatives (Dewan Perwakilan Rakyat or “DPR”), based on institutional performance reports, to evaluate the performance of BI, OJK and LPS through the relevant DPR body and issue recommendations to the DPR leadership.
7. New Framework for Transfer-of-Title Margin Arrangements
Another notable development is the introduction of Article 39A, which provides a statutory basis for margin arrangements in financial market transactions. Market participants may provide initial margin as collateral and/or transfer margin through a transfer-of-title mechanism, where required or agreed under the relevant transaction documentation. The provision is intended to provide greater legal certainty for margin arrangements used to secure obligations arising from changes in the value of financial market transactions.
Key Takeaways for Market Participants
Law 4/2026 represents a targeted refinement of Indonesia’s financial sector framework rather than a wholesale restructuring of the regime established under Law 4/2023. Its key direction is clear, broader regulatory coverage, stronger resolution mechanisms and closer integration of emerging financial activities into the existing supervisory architecture. Financial institutions and businesses operating in digital financial assets, crypto assets, financial technology, insurance and financial market transactions should assess whether the amendments affect their regulatory status, licensing and compliance obligations, insolvency exposure, governance arrangements and contractual documentation. Market participants should also monitor implementing regulations and further guidance from OJK, BI and LPS, which will be important in determining how the amended framework will operate in practice.
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Disclaimer
This news update is prepared for general informational purposes only. The content does not constitute legal advice, a legal opinion, or counsel from IABF Law Firm. The information contained herein may not reflect the most current developments. Any quotation, distribution, or use of this information for any purpose is solely at the user’s own risk.
