Journal of Central Banking Law and Institutions

Digital (Crypto-Based) Capital Markets for Financial Inclusion: Security Tokens and Infrastructure

2026-01-03T13:45:48+00:00

While small and medium enterprises (SMEs) play an important role in the economy, they face huge impediments to raising capital. Financial institutions are generally not eager to lend to SMEs for various reasons, and capital markets involve complex processes and infrastructure, which inhibit small firms from raising capital. While most research on cryptoassets focuses on cryptocurrencies, this paper examines how security tokens can enhance financial inclusion and presents a framework for enabling digital, crypto-based capital markets. The use of digital technology and the issuance of security tokens significantly reduce transaction costs, enabling SMEs to raise funds and providing opportunities to investors to invest in alternative asset classes. This study identifies the frameworks and features of cryptoassets and exchanges that SMEs can use to raise capital, as well as the issues that must be addressed in doing so. Specifically, the paper discusses issues related to the issuance, listing, trade, and post-trade mechanisms in digital exchanges. The use of Shariah-compliant equity- and assetbased security tokens to raise capital through digital capital markets can play an important role in enhancing financial inclusion and promoting development in Organisation of Islamic Cooperation member countries.

Revolutionising Islamic Finance with Artificial Intelligence: A Bibliometric and Strategic Analysis

2025-05-06T02:23:39+00:00

This study examines the development of Artificial Intelligence (AI) research in Islamic finance and analyses its regulatory and institutional implications for central banks and financial supervisory authorities. Specifically, the study maps scholarly trends on AI-enabled Islamic finance and assesses regulatory strengths, weaknesses, opportunities, and threats faced by public financial authorities in governing AI adoption. Using bibliometric analysis of Scopus-indexed publications from 2017 to 2024, the study identifies research trends, key contributors, institutional affiliations, and thematic evolution in this field. The findings show a steady increase in scholarly output, with 47 publications over the past decade, led by authors including Shahnawaz Khan and Mohammad Irfan, and significant contributions from institutions in Malaysia and Bahrain. Topic mapping reveals that AI adoption in Islamic finance is increasingly associated with innovation, blockchain integration, and sustainable development, raising significant regulatory concerns. To support this objective, a SWOT analysis is employed and reframed as a regulatory and institutional assessment that evaluates how central bank innovation mandates and supervisory instruments constitute strengths and opportunities, while legal uncertainty, algorithmic bias, data protection, and supervisory capacity represent key weaknesses and threats. The study concludes that although AI holds substantial potential to enhance efficiency and governance in Islamic finance, its effective deployment depends on coherent regulatory frameworks, strengthened coordination between central banks and Sharia authorities, and sustained capacity-building to manage emerging legal and institutional risks.

AI in India’s Financial Sector: Navigating the Regulatory Landscape

2025-05-06T02:17:27+00:00

Artificial Intelligence (AI) integration in India’s financial sector offers transformative potential but poses challenges like algorithmic bias, data privacy risks, and regulatory fragmentation. This study employed both one-on-one interviews and surveys with various stakeholders in the financial services sector to analyse India’s AI governance framework through expert interviews and a comparative policy analysis of global models (the EU’s risk-based AI Act and the US sector-specific guidelines). Findings reveal gaps in accountability, transparency, and enforcement mechanisms, particularly for high-risk applications like credit scoring. This study proposes a hybrid regulatory model that combines binding rules for high-risk AI systems (e.g., fraud detection) with co-regulation for low-risk tools, emphasising scientific risk assessment, consumer grievance mechanisms, and iterative policymaking. While leveraging India’s existing financial laws (e.g., Reserve Bank of India guidelines), we recommend AI-specific updates to address explainability, bias audits, and systemic risk monitoring. However, this study is limited by its reliance on publicly available regulatory documents and expert interviews, and by its focus on the Indian context, which may overlook cross-border AI governance challenges. Stakeholder collaboration and phased implementation are critical to balancing innovation with ethical safeguards in India’s evolving digital economy.

Legal Certainty for AI-Related Crimes in Indonesia’s Banking Sector

2025-12-30T02:08:26+00:00

As the integration of artificial intelligence (AI) into Indonesia’s rapidly evolving financial sector accelerates, the country faces critical challenges in ensuring legal certainty and protecting personal security. The rise of AI technologies in banking, fintech, and investment platforms introduces new complexities in regulatory oversight, particularly in preventing crimes such as fraud, money laundering, and cybersecurity breaches. This study examines legal certainty in the regulation of AI-related crimes in Indonesia’s banking sector and its implicationsfor personal security. The increasing use of AI in financial services has created regulatory challenges, particularly regarding personal data protection, fraud, and accountability. This research employs a normative juridical method with a statutory approach, analysing relevant Indonesian laws, including the Personal Data Protection Law, the Banking Law, the Electronic Information and Transactions Law, and the Financial Services Authority regulations. The findings reveal a legal vacuum in addressing AI-facilitated crimes, particularly regarding the allocation of responsibility and preventive mechanisms. Although existing regulations provide partial protection, they do not yet accommodate the specific risks posed by AI technologies in banking. This regulatory lacuna threatens legal certainty and personal security, particularly the right to privacy. This study highlights the urgency of developing explicit AI-related criminal laws for the financial sector to balance innovation and protection. This research is limited to doctrinal legal analysis and does not include empirical data, which may be explored in future studies.

Gold Trade-Based Money Laundering and Central Banking Governance in Indonesia: Implications for Reserve Integrity, Payment Systems, and Financial System Stability

2026-02-08T04:15:58+00:00

Trade-based money laundering (TBML) has increasingly exploited commodities markets, including gold trading, to disguise illicit cross-border financial flows. In Indonesia, the growing integration of gold markets with the financial system has created vulnerabilities that threaten the financial system’s integrity, endangering its stability and effective central bank governance. This paper examines how TBML using gold affects key domains of central bank oversight in Indonesia, particularly reserve integrity, payment system monitoring, and financial system stability. The study employs a legal-institutional analytical approach, combining regulatory analysis with an institutional examination of central banking mandates and anti-money-laundering governance frameworks. The findings indicate that using gold to facilitate TBML can obscure the traceability of cross-border financial transactions, complicate monitoring of payment systems, and potentially weaken safeguards related to reserve management and financial system oversight. These vulnerabilities create governance challenges for financial authorities responsible for maintaining financial system integrity. From a normative legal perspective, the study highlights the need for strengthened regulatory coordination, improved oversight of gold-related financial transactions, and enhanced integration between supervision of Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) measures and central bank regulatory design. Such measures are essential for safeguarding the integrity of the reserves and supporting the stability of the financial system.

Legal Implications of Blockchain Technology for the Indonesian National Financial System and Monetary Authorities

2026-03-07T05:00:59+00:00

Bank Indonesia faces significant governance challenges as it integrates blockchain technology into the national financial infrastructure. While blockchain offers enhanced transparency and operational integrity, it also raises critical concerns about security, systemic vulnerabilities, and legal accountability. This doctrinal study examines blockchain deployment within the Indonesian financial system, focusing on data protection, technical risks, and the allocation of liability for system failures or breaches. Findings indicate that while decentralised architectures can bolster transactional trust, they are constrained by smart-contract vulnerabilities and interoperability issues. Legally, determining accountability in distributed networks remains problematic, especially where centralised control is absent. Consequently, the study advocates for a comprehensive, adaptive regulatory framework anchored in public institutional authority. Such a framework must align blockchain use with statutory obligations regarding data protection and payment system governance. Grounded in Indonesia’s legal structure and international standards, this approach provides a model for jurisdictions seeking to integrate blockchain into state-supervised financial systems.

Central Bank Financial Strength and Monetary Policy Effectiveness: Institutional and Governance Perspectives from a Systematic Literature Review

2026-02-13T00:54:22+00:00

The study offers an interpretation of how central bank financial strength is constructed through legal and governance frameworks by systematically reviewing 17 scholarly articles. Based on the findings of this systematic literature review, it is evident that central bank financial strength is influenced by various legal frameworks, such as capitalisation rules, loss-absorption rules, surplus distribution rules, and a legal framework that outlines the relationship between monetary and fiscal authorities. The findings suggest that insufficient Central Bank Financial Strength (CBFS) can lead to governance issues, such as greater fiscal dependence and reduced protection against political interference. The review identifies important institutional and legal implications. The study concludes that it is crucial to strengthen capital adequacy rules, ensure transparent reporting, establish independent oversight, and have clear procedures for recapitalisation. From this perspective, it is evident that CBFS is part of the legal framework of central banking and offers a design-based platform through which central banking authorities can build and maintain credibility.