The Legislative Landscape of Cryptocurrencies in Indonesia Prior to 2024

In the period leading up to 2024, Indonesia’s approach to cryptocurrency regulation was multifaceted, reflecting its cautious yet progressive stance towards the burgeoning sector. The country recognized the potential of cryptocurrencies as trading assets or commodities, but stopped short of allowing their use as official currencies for transactions.

Regulatory Framework

The primary legislative instrument governing the crypto industry in Indonesia was Bappebti Regulation No. 8/2021, later amended by Bappebti Regulation No. 13 of 2022. These regulations outlined the guidelines for conducting crypto asset physical market trading on commodity exchanges​​. This approach was solidified in early 2023 when the government officially classified cryptocurrencies as commodities, enabling their trade on exchanges but barring their use as legal tender​​.

Oversight and Compliance

The Indonesian Commodity Futures Trading Supervisory Authority (BAPPEBTI), under the Ministry of Trade, played a pivotal role. Regulation No. 5 of 2019, issued by BAPPEBTI, provided comprehensive guidelines for handling cryptocurrencies in the Indonesian market. Notably, financial institutions were prohibited from selling and supporting the sale of crypto assets​​.

BAPPEBTI approved 229 crypto assets for trading, with stringent requirements in place. Cryptocurrencies had to comply with risk assessment, anti-money laundering (AML), and countering the financing of terrorism (CFT) protocols. Additionally, crypto traders were mandated to maintain transaction histories for at least five years and host servers within Indonesia​​.

Setting Up a Cryptocurrency Business

Foreign investors interested in establishing a cryptocurrency business in Indonesia were required to become certified Crypto-Asset Physical Traders. This certification necessitated substantial financial commitments, including a minimum paid-up capital of IDR 50 billion and equity of at least IDR 40 billion. Applicants also had to obtain a PSE accreditation from the Ministry of Communication and IT and adhere to BAPPEBTI’s prerequisite system​​.

Operational Guidelines

Upon receiving a license from BAPPEBTI, entities could engage in various crypto business activities such as opening cryptocurrency exchange platforms, creating digital wallets, and trading digital assets with the Indonesian Rupiah. All transactions had to be conducted on recognized exchanges and reported to BAPPEBTI monthly​​.

Shifting Regulatory Authority

A significant development was the Law on Development and Strengthening of the Financial Sector, which aimed to update several financial sector regulations, including those for crypto assets. This law transferred regulatory and oversight responsibilities from the CFTRA to the Financial Service Authority (OJK). A Board of Commissioners was established under this law to regulate activities involving digital currency in Indonesia​​.

Introduction of Digital Rupiah

Bank Indonesia, the country’s monetary authority, announced its plans to issue its own Central Bank Digital Currency (CBDC), known as the Digital Rupiah. This initiative marked a significant step towards integrating digital currencies into the mainstream financial system. The Digital Rupiah was expected to bring more stability and legal protection due to its centralized nature, potentially influencing the broader cryptocurrency market in Indonesia​​.

In summary, Indonesia’s legislative landscape for cryptocurrencies prior to 2024 was characterized by a regulatory environment that recognized the importance of digital assets while maintaining strict controls to ensure compliance, security, and stability. The evolving nature of these regulations reflected the country’s effort to balance innovation with investor protection and market integrity.