Crypto regulation in Indonesia
Indonesia's approach to cryptocurrency reflects a cautious yet evolving stance. The government recognizes the potential economic benefits of digital currencies while being wary of their inherent risks, such as volatility and security concerns. As Southeast Asia's largest economy, Indonesia has seen a growing interest in cryptocurrencies among its digitally savvy population. The crypto market has expanded significantly, with transactions reaching approximately $1.92 billion in February 2024, indicating robust engagement from citizens.
Public perception is mixed; while many view cryptocurrencies as investment opportunities, authorities remain focused on implementing regulations to safeguard investors and maintain market integrity. The government has taken steps to regulate the market, notably through the Commodity Futures Trading Regulatory Agency (Bappebti), which classifies cryptocurrencies as commodities rather than legal tender.
Regulation
The regulatory landscape for cryptocurrencies in Indonesia has evolved considerably over the years. A significant turning point occurred in 2017 when Bank of Indonesia prohibited the use of cryptocurrencies as a means of payment. However, in 2018, Bappebti officially recognized cryptocurrencies as commodities, allowing for their trading under strict regulations. Key regulations include several Bappebti Regulations, firstly №8/2021 with the guidelines for trading crypto assets on commodity exchanges and №13/2022 that expanded it.
The Financial Omnibus Law introduces a significant shift, transferring regulatory authority from Bappebti to the Financial Services Authority (OJK) by January 12, 2025. This transition aims to create a more unified regulatory framework for cryptocurrencies, reflecting the government's recognition of the sector's rapid evolution and the need for comprehensive oversight.
Bappebti Regulation №11 of 2022 (with amendments) lists the cryptocurrencies that can be legally traded in Indonesia. Crypto exchanges wishing to list a new cryptocurrency can submit a proposal for its inclusion through the Crypto Asset Futures Exchange. The Futures Exchange and the Crypto Asset Committee will then assess the proposal before submitting a recommendation to Bappebti. With the most recent expansion in June 2023 it is possible to trade in Indonesia the total of 501 approved digital assets.
Currently, cryptocurrencies are not recognized as legal tender, meaning they cannot be used for everyday transactions. However, businesses and individuals can engage in trading and investment activities involving cryptocurrencies, provided they adhere to regulatory requirements
Virtual asset service providers (VASPs)
In Indonesia, buying and selling cryptocurrencies is facilitated through licensed exchanges and physical traders. The process requires compliance with regulations set forth by Bappebti and, soon, the OJK. Popular local exchanges include Indodax, Tokocrypto and Pintu. Indodax is the biggest crypto exchange in the country and it is well-known all around the Globe. These platforms allow users to trade a list of more than 500 crypto assets, including most popular tokens and even some mem-coins like PEPE. Internationally, platforms like Binance and Coinbase are also accessible to Indonesian users.
Indonesia is the only country that has established a state-owned cryptocurrency exchange, known as the [Indonesia’s Crypto Asset Futures Exchange][https://tokenscope.com/en/vasp/95910335-1f84-4648-849b-40f880fd7a74], along with a clearing house and a depository for cryptocurrencies. This initiative was officially announced on July 20, 2023, and is part of a broader effort by the Indonesian government to create a regulated and secure trading environment for crypto assets. Establishing the exchange the government aimed to enhance transparency and protect investors in the rapidly growing cryptocurrency market, which has seen a significant increase in user participation. In June 2023 alone, over 141,800 new customers began trading crypto assets in Indonesia.
The key regulation governing VASPs is Bappebti Regulation No. 8 of 2021, which provides guidelines for the trading of crypto assets in the futures market. This regulation defines crypto assets as intangible commodities and sets out the requirements for futures exchanges, crypto asset traders, futures clearing agencies, and crypto asset storage providers.
Mining
Cryptocurrency mining in Indonesia is subject to regulatory scrutiny. While there is no specific legal framework governing mining activities, the practice is generally permitted as long as it complies with existing laws. Mining has gained popularity, particularly among tech-savvy individuals and companies looking to capitalize on the potential profitability of digital currencies.
However, authorities have expressed concerns about the environmental impact and energy consumption associated with mining. As a result, there are ongoing discussions regarding the need for regulations that address these issues while promoting responsible mining practices. Future plans may include more defined guidelines to ensure that mining operations align with national energy policies and sustainability goals.
Taxation
Indonesia has implemented a tax regime for cryptocurrency transactions, treating profits from crypto trading as investment income subject to personal income tax or corporate income tax. The specific tax rates and conditions vary based on the nature of the transactions and the status of the taxpayer.
Individuals must declare income from cryptocurrency trading as part of total annual income and is taxed according to a progressive tax rate scale. For legal entities profits from cryptocurrency transactions must be included in a company's total tax turnover and are subject to profits tax at the standard rate.
Indonesia has implemented a 0.11% VAT on crypto transactions. The issue of levying VAT on cryptocurrency transactions remains open, as cryptocurrencies are not recognized as legal tender. However, intermediary services related to the purchase or sale of cryptocurrencies may be subject to VAT. In April 2022, Indonesia has also implemented a 0.1% capital gains tax on crypto investments.
The main challenges of cryptocurrency taxation in Indonesia include the lack of specialized legislation, difficulties in identifying tax liabilities due to the anonymity of transactions, and the high volatility of cryptocurrencies, which makes it difficult to assess income and expenses.
Possible developments in the tax regulation of cryptocurrencies in Indonesia may include clarifying legislation, strengthening controls on financial transactions in cryptocurrencies, and introducing new tax instruments to combat money laundering through crypto-assets.
Also, Indonesia, through its central bank, is actively exploring the development of a central bank digital currency (CBDC) known as the Digital Rupiah. The initiative, called Project Garuda, aims to safeguard the sovereignty of the Indonesian Rupiah in the digital era and support the integration of the national digital economy and finance. Bank Indonesia is actively collaborating with stakeholders and conducting public consultations to gather input for developing the optimal Digital Rupiah design. The central bank is also participating as an observer in the mBridge cross-border CBDC project and plans to establish the Indonesia Digital Innovation Center (BIDIC) to support a sandbox environment for testing, market intelligence, and collaborative research with industry partners.
