The regulations governing Indonesia's economy are going to undergo a significant revision soon. This is how it could possibly look.

After two years of failed attempts and pushback from the market, Indonesia is getting ready to adopt comprehensive changes to the regulation of its financial sector as soon as this week.

The new bill aims to broaden the scope of the central bank and enshrine its right to buy government bonds during times of crisis, just as it has done in the previous three years to help shore up the economy of the largest country in Southeast Asia. By the end of 2022, the central bank would have purchased debt papers worth a total of 1,144 trillion rupiah, which is equivalent to $73 billion USD. Additionally, the law intends to bring existing legislation up to speed with the fast developing fields of cryptocurrencies and financial technology.

Following the approval of the bill by the finance commission on December 8th, a vote on the legislation is scheduled to take place in Parliament this coming week. The following is information you need to know regarding the reform of the financial sector:

Why is Indonesia attempting to update its outdated financial regulations?

Existing regulations are difficult to understand and frequently overlap with one another, if not directly contradict one another. In light of the recent expansion of the fintech industry and the ambitions that the central bank has for a digital rupiah, they are also out of date.

The government anticipates that the adjustments will assist in further developing the local capital markets so that they can better finance the needs of the economy.

It is also in keeping with the purpose of President Joko Widodo to change legislation in order to remove bureaucratic red tape and simplify procedures, particularly in order to ensure that financial authorities can respond to crises in a more timely manner.

What sorts of shifts might we expect to see at the federal reserve?

It would cement Bank Indonesia's unprecedented move during the pandemic, which both the central bank and the finance ministry had described as a "one-off" measure. If the law is passed, it will give Bank Indonesia the authority to come to the government's aid by purchasing bonds when the president declares a crisis. If the law is passed, it will give Bank Indonesia this authority.

As part of the proposal, the lawmakers want the central bank to "participate in maintaining financial system stability in order to support sustainable economic growth." Additionally, on top of its existing mandate to ensure price stability and the stability of the rupiah, the lawmakers want the central bank to maintain the stability of the payment system.

The previous effort to expressly incorporate job creation and economic growth in Bank Indonesia's purpose was withdrawn from the most recent draft because analysts felt doing so would pose concerns to the institution's independence.