Crypto and Digital Assets in Indonesia: Regulations and Implications

Jack Wiston

The use of cryptocurrencies and other digital assets is still a relatively new industry but has been growing rapidly in Indonesia in recent years. With approximately IDR 130 trillion (US$9 billion) of crypto assets being traded within the country and an estimated 12 million Indonesians owning some form of cryptocurrency (2022 survey, Central Bank of Indonesia), it is clear that a robust and comprehensive regulatory framework surrounding the once-niche field is required. The government of Indonesia is still working on developing regulations for the industry. In January 2023, the government issued a new regulation that classified cryptocurrencies as a commodity, which means that they can be traded on exchanges but cannot be used as a legal tender. This regulatory switch has had a number of implications for the crypto and digital asset industry in Indonesia.

Regulating Crypto

Crypto regulatory powers are now held by the Financial Services Authority (OJK), previously under the Commodity Futures Trading Regulatory Agency (Bappebti) who regulated crypto as a commodity such as gold. 

The OJK has issued a number of regulations governing the crypto and digital asset industry, such as:

• Regulation No.11/POJK.07/2018 on the Implementation of the Payment System
• Regulation No.4/POJK.07/2019 on the Issuance of Crypto Asset Exchange Services
• Regulation No.5/POJK.07/2020 on the List of Crypto Assets That Can Be Traded in Crypto Asset Exchange Services

Aside from the regulations provided for by the regulatory bodies, the Criminal Code of Indonesia also contains provisions that could be used to prosecute individuals who engage in illegal activities related to crypto and digital assets, such as money laundering and fraud. 

Implications of the OJK takeover

One of the most significant implications is that it has made it more difficult for businesses to accept cryptocurrencies as payment. This is due to a requirement for businesses to obtain a license from the OJK in order to do so. The OJK has been reluctant to grant these licenses, citing concerns about the risks associated with cryptocurrencies.

Another implication of the new regulation is that it has made it more difficult for Indonesians to invest in cryptocurrencies. This is because Indonesian citizens are now required to register with the OJK before they can trade cryptocurrencies. The OJK has also given warning about the risks of investing in cryptocurrencies, and has said that it will take action against those who engage in illegal activities related to cryptocurrencies.

Despite these challenges, the crypto and digital asset industry in Indonesia is still growing. There are now a number of exchanges operating in the country, and the number of Indonesians who own cryptocurrencies is continuing to grow. The industry is also attracting investment from foreign companies.

Economic growth

The growth of the crypto and digital asset industry could have a number of positive implications for the economy and business in Indonesia. For example:

• Attracting foreign investment: The crypto and digital asset industry is attracting investment from foreign companies, which could significantly boost the economy.
• Creating jobs: The industry is also creating jobs, both directly and indirectly. For example, it is creating jobs in the finance and exchange sector, in the development of new technologies, and in the education sector.
• Promoting innovation: The industry is promoting innovation, as businesses are developing new ways to use cryptocurrencies and other digital assets. This could lead to new products and services that could benefit the economy.

However, there are also some potential risks associated with the growth of the crypto and digital asset industry. For example:

• Increased financial instability: If the value of cryptocurrencies fluctuates wildly, it could destabilize the financial system.
• Facilitated money laundering and other criminal activities: Cryptocurrencies can be used to anonymously transfer funds, which could make it easier to launder money or finance criminal activities.
• Increased consumer protection risks: There is a lack of consumer protection regulations in the crypto and digital asset industry, which could leave consumers vulnerable to fraud and other risks.
• The government will need to carefully balance the potential benefits and risks of the crypto and digital asset industry in order to ensure that it has a positive impact on the economy and business in Indonesia.

The future of crypto and digital assets in Indonesia is uncertain. However, the industry is likely to continue to grow in the coming years, and it is possible that cryptocurrencies could become a more widely accepted form of payment. The change in regulation is a step in the right direction, but the government will need to take further steps to mitigate the risks associated with the industry in order to ensure that it has a positive impact on the country.