From a digital curiosity, cryptocurrencies have become a crucial part of the global financial system, prompting authorities to take action to mitigate their effects. Regulation of cryptocurrency in Indonesia has been tricky. Southeast Asia's largest economy, Indonesia, has a sizable, internet-savvy populace.

The nation exploits digital currencies' economic potential while mitigating their volatility and the technology that enables them.

This article covers Indonesia's cryptocurrency regulation history, current state, regulatory authorities, legal status, licensing process, and future outlook.

A brief history of Indonesia's crypto regulation

In 2017, Indonesia's central bank, Bank Indonesia (BI), banned cryptocurrency payments. Indonesian cryptocurrency history was shaped by this occurrence. This move raised security, volatility, and legislative supervision concerns as well as the government's concern that cryptocurrencies could disrupt the financial system.

However, in 2018, the Ministry of Trade's Commodity Futures Trading Regulatory Agency (Bappebti) classified cryptocurrencies as commodities. This changed the story. This classification allowed legitimate trading of digital assets on futures markets if the exchanges and assets they exchanged fulfilled strict regulatory rules to protect investors and market integrity.

One year later, in February 2019, Bappebti released bitcoin exchange trading guidelines, strengthening cryptocurrency regulation.

In 2024, the cryptocurrency landscape in Indonesia

The OJK and Bank Indonesia are steering the cryptocurrency ecosystem toward Indonesia. These institutions help create a cryptocurrency regulatory environment that prioritizes investor safety, transparency, and protection.

Several major laws govern crypto trading and investment in the country. The regulatory structure relies on these laws. The Bappebti Regulation No. 8/2021, modified by No. 13 of 2022, establishes comprehensive crypto asset trading guidelines on commodities exchanges.

This legislation included the Bappebti Regulation No. 4 of 2023, which expanded the spectrum of tradable crypto assets and made the cryptocurrency market more inclusive.

Law No. 4 of 2023, the Financial Omnibus Law, added to existing legislation. Bappebti's regulatory jurisdiction, vital to this act, will be transferred to the OJK. By January 12, 2025, OJK will adopt a more uniform regulatory strategy. This modification affects supervision significantly.

Who in Indonesia supervises the regulation of cryptocurrencies?

Bank Indonesia and the Financial Services Authority, also referred to as OJK in the local community, are the two primary authorities in Indonesia that are in charge of overseeing and governing cryptocurrencies. The financial and banking sectors of the country, particularly the rapidly growing cryptocurrency business, are being significantly influenced by these entities through their crucial role.

Bank Indonesia

In its capacity as the nation's central bank, the Bank of India (BI) is accountable for the macro-supervision of the banking and financial services businesses. It is responsible for overseeing both prudential and conduct oversight, and its scope of authority extends to the regulation of monetary policy and payment system services.

This includes a considerable duty for supervising key payment system providers such as Visa and Mastercard, with the goal of ensuring the stability and integrity of Indonesia's monetary and financial landscapes.

Regulatory Body for Financial Services

Many financial institutions are directly monitored and regulated by OJK. It was created in 2011 from BI’s supervision activities. This change was made to protect financial services customers and ensure that banks, insurers, investment firms, and non-bank financial organizations are heavily regulated by the government. Beyond regular corporations, OJK now regulates fintech companies, particularly peer-to-peer lenders.

OJK examines microeconomic aspects and market conduct, while BI’s examines macroeconomic elements and financial system health. They work together to provide a comprehensive regulatory framework that protects consumers and investors and fosters a stable, transparent, and inclusive financial system.

The legal status of cryptocurrencies in Indonesia has assumed a clear shape, with digital assets being officially recognized as commodities. This is a significant development. By establishing a systematic regulatory framework for the trading of cryptocurrencies on futures exchanges, the Bappebti has legitimized cryptocurrencies and established a key classification for them.

Due diligence on the part of the customer

In order to comply with Indonesian rules, businesses that deal with cryptocurrencies are required to collect and authenticate consumer information while also assessing the risks that are connected with the process.

The procedure for obtaining a cryptocurrency license and the compliance requirements in Indonesia

In mid-July 2023, Bappebti granted licenses to cryptocurrency asset futures exchanges, futures clearing houses for guaranteeing and settling cryptocurrency physical market deals, and cryptocurrency asset storage managers. This was vital to institutionalizing crypto asset transactions in the country's financial sector.

To operate in Indonesia, cryptocurrency companies must pass a rigorous licensing process. This approach evaluates platforms' operational, financial, and security frameworks. Bappebti requires crypto asset futures exchanges to have a large amount of paid-up capital and follow strict equity requirements in anticipation of OJK regulation. This safeguards investors by allowing only strong operational and financial enterprises to participate in the market.

Crypto taxed in Indonesia?

Indonesia taxes crypto trading gains as commodities, not currency, therefore income tax (PPh) and VAT apply. The VAT rate is 0.11% of transaction value and income tax is 0.1%.

Indonesian cryptocurrency exchanges must collect PPh and VAT. At transaction time, exchanges withhold these taxes. Users sell or exchange cryptocurrencies and pay taxes before receiving their gains. Understand that crypto losses cannot negate other profits.

Indonesia's crypto regulatory future

The Indonesian cryptocurrency market grew to $1.92 billion in February 2024. This growth shows Indonesians' growing interest in cryptocurrency and suggests regulatory changes to encourage it.

The OJK will shape financial innovation in the future. Starting in January 2025, OJK laws will cover cryptocurrencies. This smart action shows authorities' acknowledgment of cryptocurrency's rapid growth and changing business practices.

Indonesia hopes to advance crypto legislation by connecting legal frameworks with technical innovation.