Redefining the Bullion Industry in Indonesia: OJK Reg 17/2024
Authors
Overview
Gold has long been a stable and resilient investment in Indonesia. Investment options have evolved from traditional trading to gold futures contracts, digital gold markets, and the upcoming launch of gold exchange-traded funds (“ETFs”) in 2025. To meet growing demand and strengthen the financial sector, the government enacted Law No. 4 of 2023 concerning the Strengthening and Development of the Financial Sector (“Law 4/2023”), providing a legal framework for the bullion business. This law tasks the Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) with regulating the sector, leading to OJK Regulation No. 17 of 2024 on the Organization of Bullion Business Activity (“OJK Reg 17/2024”), which outlines the rules for organizing and conducting bullion business activities in Indonesia.
Key Points for Establishing a Bullion Business
- Definition of Bullion Business
Bullion business involves gold-related activities carried out by financial services institutions. These activities are further detailed below.[1]
- Eligibility Criteria for Bullion Organizers
Only financial services institutions focused on credit distribution or financing are eligible to run bullion businesses, excluding people’s economic banks, shariah-based people’s economic banks, and microfinance institutions. [2] Eligible institutions must maintain a minimum health level assessment of composite rating 2 (two) or healthy. [3]
- Capital Requirements
To apply for a license, eligible financial services institutions conducting bullion business activities (“Bullion Organizers”), must meet a minimum capital and/or equity threshold of IDR 14 trillion. [4] Exceptions to this requirement apply if the Bullion Organizers plans to operate gold deposit activities. [5]
Eligible Golds for Bullion Activity
Golds used for bullion activity refer to golds in the form of bars or plates, and not in the form of currency, with a minimum content of Aurum (Au) of 99.9%. Furthermore, for such golds, Bullion Organizers are mandated to use the standards as issued by the Indonesian National Standard (Standar Nasional Indonesia) as issued by the National Standardization Body (Badan Standardisasi Nasional) and/or in accordance with the international practice, which shall be the one issued by the London Bullion Market Association. [6]
Types of Permissible Activities for Bullion Activity
OJK Reg 17/2024 has stipulated business activities which are permitted to be conducted under the bullion activity, as follows:
- Gold Savings (Simpanan Emas)
Gold savings refer to the saving of a standardized amount of gold entrusted by the public to the Bullion Organizers, based on an agreement between the the public and Bullion Organizer. [7]
In managing gold under this activity, the gold stored by the customers is classified as unallocated account, which is a scheme of gold savings, which is a gold savings scheme where customers do not physically hold the gold but retain a claim right to it. [8] The golds that are put into savings in the gold savings may be used as a source for gold financing and/or gold trading activities. [9]
- Gold Financing (Pembiayaan Emas)
Gold financing refers to the arrangement in which a standardized quantity of gold is provided based on an agreement between the Bullion Organizers and another party. Under this arrangement, the financed party is required to return the specified quantity of gold within a certain period, along with compensation or profit-sharing (gold-to-gold). [10]
For gold financing, a collateral is mandatory to guarantee the financing. In this regard, depending on the type of the Bullion Organizers, the collateral may be in the form of the following: [11]
Collateral
Banks’ Bullion Organizers
Non-Banks’ Bullion Organizers
Cash or its equivalent
✔
✔
Time deposit (deposito berjangka)
✔
✔
Gold inventory (persediaan emas)
×
✔
Securities issued by the Government of the Republic of Indonesia
✔
✔
Securities issued by Bank Indonesia
✔
✔
The value of the aforementioned collateral must be at least 100% of the gold financing value. [12] In the event of price fluctuation of golds, there may be adjustments to the collateral which shall be in the form of cash or its equivalent. [13]
Furthermore, for the gold financing activity, the Bullion Organizers must fulfil the minimum limit of gold grams for financing, which is at least 500 grams per transaction. [14]
As for the repayment of the gold financing, it must be conducted by the customers in the form of gold as well. [15]
- Gold Trading (Perdagangan Emas)
Gold trading refers to the standardized buying and selling of gold carried out based on an agreement between the parties and not intended for gold financing and/or gold deposit activities. [16]
For such trading, the applicable minimum grammage is 500 grams per transaction. [17] However, such minimum requirement is exempted for traded gold that is used for gold savings activity, settlement of gold financing, and/or gold deposit. [18]
Bullion Organizers are allowed to use golds sourced from: (i) golds deposited in the gold savings; and/or (ii) golds belonging to the bullion organizers.
Gold trading must be conducted physically, meaning that the gold being traded must adhere to the previously established quantity and quality standards. Transactions must occur through spot trading, where the sale is executed directly, the asset is delivered, and payment is made promptly. [19]
- Gold Deposit (Penitipan Emas)
In the activity of gold deposit, it mainly covers the activities of storing the gold deposited by the customers by the Bullion Organizers, which shall be further returned in the same condition as when it was deposited, under the conditions stipulated in the gold deposit agreement. [20]
For the management of gold in this activity, the gold shall be classified as allocated account, which has the meaning of an account for gold managed on behalf of the customer, in accordance with the agreement, and stored in the vault of the Bullion Organizers. The Bullion Organizers do not have ownership rights over the gold. [21]
Gold deposited in under this activity is prohibited to be used in the gold financing and/or gold trading. [22]
- Other Activities Conducted by Financial Services Institutions
Besides the above activities, Bullion Organizers are allowed to conduct other activities which shall be intended to support the bullion business activity. [23] In order to do such, the Bullion Organizers must first obtain the permission from the OJK. [24]
Operational Phases of Bullion Business
Bullion business activities must be carried out in 3 sequential phases, each defined by the proportion of gold sourced from gold savings in unallocated accounts. To begin operations, Bullion Organizers must start with the first phase. [25] Progression to the next phase requires the following: (i) conducting a self-assessment; (ii) including the next phase in the business plan; and (iii) securing approval from the OJK. [26] Each phase must be completed before advancing to the next, maintaining compliance and supporting a well-structured implementation process.
Transitional Provision
Financial institutions licensed by the OJK before the enactment of OJK Reg 17/2024 and already engaged in bullion business activities must apply for a bullion business license no later than 6 months after the regulation’s enactment, by 18 April 2025.
Article 1 point 1 of OJK Reg 17/2024. ↩︎
Article 21 paragraph (1) of OJK Reg 17/2024. ↩︎
Article 21 paragraph (2) of OJK Reg 17/2024. ↩︎
Article 22 paragraph (1) of OJK Reg 17/2024. ↩︎
Article 22 paragraph (2) of OJK Reg 17/2024. ↩︎
Article 3 of OJK Reg 17/2024. ↩︎
Article 1 point 2 of OJK Reg 17/2024. ↩︎
Article 5 paragraph (1) of OJK Reg 17/2024. ↩︎
Article 5 paragraph (2) of OJK Reg 17/2024. ↩︎
Article 1 point 3 of OJK Reg 17/2024. ↩︎
Article 8 paragraph (2) of OJK Reg 17/2024. ↩︎
Article 8 paragraph (3) of OJK Reg 17/2024. ↩︎
Article 8 paragraph (4) of OJK Reg 17/2024. ↩︎
Article 9 of OJK Reg 17/2024. ↩︎
Article 10 of OJK Reg 17/2024. ↩︎
Article 1 point 4 of OJK Reg 17/2024. ↩︎
Article 12 paragraph (3) of OJK Reg 17/2024. ↩︎
Article 12 paragraph (2) and (3) of OJK Reg 17/2024. ↩︎
Article 13 of OJK Reg 17/2024. ↩︎
Article 14 paragraph (1) of OJK Reg 17/2024. ↩︎
Article 14 paragraph (2) of OJK Reg 17/2024. ↩︎
Article 17 of OJK Reg 17/2024. ↩︎
Article 18 paragraph (1) of OJK Reg 17/2024. ↩︎
Article 18 paragraph (4) of OJK Reg 17/2024. ↩︎
Article 27 of OJK Reg 17/2024. ↩︎
Article 31 paragraph (1) of OJK Reg 17/2024. ↩︎
Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.
Related Updates
Latest Updates
