What are Indonesia's Cryptocurrency Laws?

Cryptocurrencies and crypto-assets have been regulated in Indonesia since 2011. In 2017, the Indonesian authorities declared that cryptocurrency was neither a currency nor an asset. As a result, cryptocurrencies in Indonesia are not considered legal tender and are unregulated by banks and other financial regulators. 

This means that trading or owning cryptocurrencies is legal in Indonesia, but only for private trading of commodities among individuals or within certain companies. We’ve compiled a small cache of information on how Indonesian law engages with cryptocurrency markets below.

Indonesia Has a Few Cryptocurrency Laws Already

Indonesia has a few cryptocurrency laws on the books. The government has not made it easy for crypto businesses to flourish, and there is still a lot of confusion about how to apply these laws in the real world. Here are some of the biggest rulings on cryptocurrency from Indonesian courts and regulators:

• On October 31, 2018, Indonesia’s OJK (Otoritas Jasa Keuangan - Financial Services Authority) issued a ruling that financial institutions should not trade cryptocurrencies or provide services related to cryptocurrency trading. Banks were also instructed to close bank accounts of companies related to digital currencies by December 31st if they did not have an official operating license granted by OJK or BAPPEBTI (Badan Pengawas Pasar Modal - Capital Market Supervisory Board).
• In September 2018, Bank Indonesia banned all financial institutions from using any form of virtual currency, including Bitcoin, as part of their payment systems. This ban was lifted in February 2019 but now only applies to transactions with foreign entities such as international banks or foreign currencies like dollars or euros.

The Indonesian Government Is Suspicious of Cryptocurrency

In Indonesia, cryptocurrency is not a legal currency, it's not a legal tender, it's not a payment system, and it's not a financial instrument. It's also not considered a commodity. That said, there is no official statement from the Bank of Indonesia (the country's central bank) regarding the legality or regulation of cryptocurrencies in the country.

If you want to use cryptocurrency in Indonesia—for example, Bitcoin—you need to understand that there are no laws about how you can trade them for goods or services; how you can convert them into other currencies based on cryptocurrency value; or whether your investment gains will be taxable; or what happens if your account is hacked. There are essentially no rules at all governing digital currency transactions.

There Is Still Some Confusion About Real World Applications

The Indonesian government has given the country's central bank authority to regulate cryptocurrency prices and transactions. However, there is still a lot of confusion about how to apply these laws in the real world.

Cryptocurrency is still a relatively new technology, and it's possible that Indonesia will develop clearer regulations in the future. In fact, Bappebti recently announced plans for a Fintech Lab at its headquarters in Jakarta—a move that could help clarify the current legal landscape for cryptocurrencies in Indonesia and make it easier for startups like us to navigate this system.

Some of the Biggest Rulings on Cryptocurrency Are From Indonesian Courts and Regulators

In a ruling from May 2019, the Supreme Court of Indonesia ruled that cryptocurrencies are not considered currencies. The decision was based on an interpretation of Article 7 of Law No. 5/1990 on money and banking (the “Law”), which states that “money” means objects or documents that can be used as payment or medium of exchange in the transaction of goods and services, including electronic money and cryptographic units.

According to this ruling, cryptocurrencies are not considered currency because they are neither issued by any central bank nor backed by any asset or physical value like gold. An Indonesian court also ruled in 2018 that Bitcoin is not legal tender due to a lack of government backing (see our article on Bitcoin).

Indonesia’s Laws Are Currently Opposed to Cryptocurrency

In Indonesia, cryptocurrency is not legal tender. This means that the government does not recognize it as a form of currency, and it cannot be used to pay taxes or other obligations. Cryptocurrency is also not classified as a security in Indonesia. Security is defined by the Indonesian Financial Services Authority (OJK), which regulates financial matters in Indonesia. 

The OJK defines securities as “securities include shares, bonds, rights, and warrants issued by companies listed on stock exchanges and any other documents that grant rights to acquire them” (Bank Indonesia 2018). Cryptocurrencies are not covered under this definition because they are not issued by companies listed on stock exchanges (i.e., Bitcoin) or give their holders any rights to acquire them (aside from those who mine Bitcoin).

The third legal category for cryptocurrencies is commodity status; however, this classification requires certain qualifications that do not apply when discussing digital currencies like Bitcoin: “The definition of commodities provided by Investment Law No 11/2015 Article 3 paragraph 1 letter b tells us that commodities are goods derived directly from nature such as raw materials and agricultural products” (Bank Indonesia 2018).

Finally, there is no payment system regulation for cryptocurrencies in Indonesia; this makes sense considering most transactions involving cryptocurrency occur online through internet-based exchanges rather than physical locations where customers exchange cash for tokens or vice versa.

It’s clear that the Indonesian government is taking a hard stance against cryptocurrencies, but as more people learn about them and their benefits, it’ll be interesting to see how this affects their position. From what we can tell right now, though, it doesn’t seem like regulations will change anytime soon unless there’s significant public outcry.