JurnalPost.com – The financial world has become increasingly digital and cross-border. However, its governance still relies heavily on national rules constrained by each country's jurisdiction.
This is where a major problem begins to emerge.
A digital asset can be issued in one country, traded through a platform registered in another, stored on servers in a different region, and then purchased by users from all over the world in a matter of minutes.
Disruptions at a single technology provider can also impact various financial institutions in multiple countries simultaneously.
Yet, when problems arise, the responsibility for oversight and resolution remains largely placed on domestic regulators working under national law.
The gap between the global character of digital finance and governance that remains national is now one of the main challenges of the digital economy.
Finance Moves Globally, Regulation Remains Local
Governments essentially regulate financial institutions based on the location of their legal entities and the jurisdiction where they operate.
Meanwhile, digital financial systems are increasingly dependent on platforms, algorithms, artificial intelligence, technology networks, and data flows that are no longer easily confined to a single national territory.
This transformation is already widespread.
A 2025 Bank for International Settlements survey shows that 85 out of 93 central banks, or about 91 percent, are exploring central bank digital currencies or central bank digital currency (CBDC), for both retail and wholesale transaction needs.
At the same time, stablecoins, tokenized assets, instant payment systems, and artificial intelligence are beginning to change how money moves and how financial decisions are made.
The problem is that regulation is not evolving as fast as innovation.
As of August 2025, only 11 jurisdictions assessed by the Financial Stability Board had completed comprehensive regulatory frameworks for crypto assets.
Even fewer, only five jurisdictions, had completed regulatory frameworks for stablecoins.
Disparities remain visible in licensing, supervision, reporting, and cross-border cooperation mechanisms.
High Costs Due to Fragmented Governance
The impact of this fragmentation is most easily seen in cross-border payment systems.
From the beginning, digitalization promised faster and cheaper international transactions.
However, World Bank data shows that the average cost of sending remittances still reached 6.36 percent of the value sent in the third quarter of 2025.
That figure is still more than double the global target of 3 percent.
Even for digital remittances, the average cost is still around 4.59 percent.
These costs primarily burden migrant workers and low-income families, including those in the Asia-Pacific region.
In fact, instant payment systems in many countries have proven that domestic transactions can be done quickly and cheaply.
New obstacles arise when payments must cross borders with different technology standards, operating hours, identification systems, foreign exchange rules, and financial integrity requirements.
The G20, through its Roadmap for Enhancing Cross-Border Payments has encouraged various improvement efforts.
However, the Bank for International Settlements warns that the benefits felt by users are still relatively limited and the targets set for 2027 may be difficult to achieve on time.
Therefore, system interoperability and data standard harmonization are becoming increasingly important.
Digital Risks Also Cross Borders
The digitalization of financial systems does not only bring benefits. Operational risks are also becoming increasingly global.
The International Monetary Fund reports that the number of cyberattacks has nearly doubled compared to the pre-COVID-19 pandemic period.
Nearly one-fifth of reported cyber incidents have impacted financial sector companies.
Potential extreme losses are also estimated to have increased to at least US$2.5 billion.
Dependence on cloud computing services and artificial intelligence also creates concentration risk.
A bank under the supervision of a national regulator may use the same technology service provider as various other financial institutions in many countries.
As a result, a disruption at one technology provider can turn into a systemic cross-border issue.
This condition highlights the importance of joint reporting principles, trusted information exchange channels, and coordinated crisis management simulations.
All of this should ideally be prepared before disruptions actually occur.
Asia-Pacific as a Key Testing Ground
These challenges are highly relevant to the Asia-Pacific region.
On one hand, this region has a rapidly growing digital payment ecosystem.
On the other hand, the Asia-Pacific also has large remittance flows and highly diverse levels of institutional capacity between countries.
Therefore, this region is an important area to test how cross-border financial innovation can be managed without ignoring domestic conditions.
These issues were also a key part of the Biennial Policy Conference held by Bank Indonesia in Bali on August 26–27, 2026.
The forum placed Indonesia in a broader discussion on how central banks can drive innovation while maintaining macro-financial stability, inclusion, and sustainable economic growth.
For Bank Indonesia and central banks in various developing countries, the issue is not just about accepting or rejecting innovation.
The more important question is how the benefits of innovation can be maximized without weakening monetary control, consumer protection, financial system integrity, and inclusion.
Technology Does Not Automatically Create Inclusion
Governance fragmentation also determines who truly benefits from financial technology developments.
Data from the Global Findex 2025 report by the World Bank shows that 79 percent of adults worldwide had a financial account in 2024.
However, about 1.3 billion adults still lack access to financial accounts.
Interestingly, nearly 900 million of them already own mobile phones.
This fact shows that technology ownership does not automatically lead to financial inclusion.
Low digital literacy, weak consumer protection, insecure identification systems, and non-transparent algorithms can recreate or even widen inequality.
Therefore, technological efficiency must go hand-in-hand with accessibility, privacy protection, transparency, and effective consumer complaint resolution mechanisms.
Governance Must Be Able to Cross National Borders
Every country has different legal systems, levels of development, institutional capacities, and public preferences.
Therefore, creating a single, fully uniform global regulatory system is not a realistic goal.
What is more feasible is building interoperable governance.
This means national systems remain based on their respective sovereignty but are able to communicate, exchange information, manage risks together, and provide relatively consistent minimum levels of protection.
There are four main foundations that need to be built.
First, shared minimum standards.
Every jurisdiction needs to have basic provisions regarding the licensing of digital asset providers, consumer asset protection, risk disclosure, and stablecoin reserve management.
Countries can still apply stricter rules, but there should be no jurisdiction that becomes a regulatory weak point.
Second, payment infrastructure needs to be designed from the start to be cross-border connected.
Connecting systems after each country has built its own technology and regulations will be far more complicated and expensive.
Interoperability should be part of the initial design.
Third, information exchange between authorities must be strengthened.
Information regarding cyberattacks, fraud, technological disruptions, and dependencies on specific providers must be shareable quickly and securely.
The division of responsibilities, confidentiality protection, and crisis management protocols must also be agreed upon from the start.
Fourth, developing countries must participate in writing the rules.
Stablecoins and foreign digital currencies can pose greater risks to countries with less stable currencies or limited regulatory capacity.
Therefore, developing countries should not just be implementers of rules drafted by developed nations.
They must also have space in the global standard-setting process.
Coordination Does Not Mean Losing Sovereignty
Without stronger coordination, the world risks facing incompatible payment networks, the emergence of jurisdictions that serve as regulatory havens, and uneven consumer protection.
Such a system might look advanced in terms of technology, but it remains economically fragmented.
Countries with smaller capacities may even become increasingly dependent on standards they never helped formulate.
The alternative is to build governance based on shared principles, interoperable infrastructure, credible information exchange, and equal engagement between developed and developing countries.
This approach does not mean reducing national sovereignty.
On the contrary, cross-border coordination actually allows each country to exercise its sovereignty more effectively within a financial system where money, data, technology, and risk no longer recognize territorial boundaries.
Finance has become digital and global. Now, its governance must catch up with that change.
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