The transformation of Aceh's financial system through Local Regulation No. 11/2018 represents a significant shift toward Islamic financial principles, presenting both opportunities and challenges in its implementation. This research examines the effectiveness of the regulatory framework in facilitating the transition from conventional to Islamic financial systems in Aceh Province. Through qualitative methodology, the study gathered insights from various stakeholders including representatives from Commission III of Aceh's Regional House of Representatives (DPRA), executives from major Islamic banks (Bank Syariah Indonesia, Bank BTN Syariah, Bank Aceh Syariah, and Bank BCA Syariah), academic experts, and community members in Banda Aceh. Using purposive sampling, informants were selected based on their direct involvement or experience with the regulation's implementation. The findings reveal several critical challenges, including insufficient public awareness, limited institutional readiness, and operational obstacles faced by businesses during the transition period. Additionally, the study identifies gaps in technical implementation support and stakeholder engagement. These insights contribute to a comprehensive understanding of the complexities involved in implementing Islamic financial regulations at the provincial level.

Keywords: Islamic Banking, Financial System Transformation, Local Regulation, and Policy Implementation.