Summary
- Crypto adoption in Indonesia is high, with the country ranked third globally and first in the region, as well as enjoying the highest year-on-year growth in adoption of almost 200%.
- Many factors are fuelling domestic interest from using cryptocurrencies to save to a wider lack of financial inclusion and trading options.
- Notably, Indonesia leads the world in DeFi value received and retail DeFi value received, underscoring Indonesians’ embrace of digital payment.
- More crypto in action stories can be found here.
Is crypto legal in Indonesia?
Yes. It’s possible to trade cryptocurrencies, but they can’t be used for everyday transactions of goods and services.
Notably, in 2023, the province of Bali reiterated the country’s ban on the use of cryptocurrencies, specifically in this case as a payment method by foreign tourists, underscoring a wider initiative to reinforce the use of the fiat, the rupiah, as the sole legal tender.
Buying cryptocurrencies is straightforward. Bitcoin, the country’s most popular cryptocurrency, can be bought by opening an account on a regulated exchange, and then using a bank transfer to fund the account.
Domestic interest in cryptocurrencies is rising fast, from 9.9 million users in 2021 to 28.52 million in 2024. With a population of more than 280 million, future potential growth prospects are sizeable.
What is cryptocurrency’s appeal in Indonesia?
Indonesia is the fourth-most populous country in the world, and with its rapidly rising digitally savvy demographic, it is inevitable that crypto adoption is high.
Use cases in Indonesia are unusually diverse, underscoring the population’s interest in different aspects of cryptocurrencies – out of interest as well as financial need – as well as the country’s high phone and app usage. The government’s mobile-first strategy has resulted in smartphone penetration of more than 90%.
The country tops the global rankings for retail centralized service value received and in terms of retail service value for both centralized and DeFi value received.
Reflecting this, a “crypto degen” community has developed with its members pursuing token projects on DeFi platforms, as well as staking and yield farming. The move in April 2024 to halve Bitcoin staking provided another boost.
With a banking system that is still developing, cryptocurrencies offer a decentralized means to store funds and conduct transactions. Notably, the growth in adoption that has been witnessed in the past 12 months is coming from cryptocurrency trading and an interest in meme coins.
This is borne out in figures. A total of 43% of value received by local exchanges in 2023-2024 came from transfers of $10,000 to $1,000,000 in size, suggesting professional trading activity.
Who is using cryptocurrency and what are the preferred platforms?
Professional traders aside, much like elsewhere, crypto appeals most to young adults. Millennials and Generation Z account for approximately 50% of the country’s crypto investor base. This is all the more so since the Indonesia Stock Exchange (IDX) introduced full call auction (FCA) measures in March 2024. By imposing stricter rules for a stock to be considered, some people have been looking for other trading options, including crypto.
Bitcoin is the most popular cryptocurrency, and Ethereum, Dogecoin and Shiba Inu are also used. Preferred hardware wallets include Trezor and Ledger, while Exodus and MetaMask serve those looking for software wallets.
In terms of exchanges, Tokocrypto received a PFAK license in September 2024, allowing it to operate as a physical crypto asset trader, in accordance with Bappebti Regulation No. 13 of 2022. A member of the Binance group, it was granted a license by the country’s Commodity Futures Trading Regulatory Agency or Badan Pengawas Perdagangan Berjangka Komoditi (Bappebti). Other popular exchanges are Indodax, Kraken and Upbit.
The government launched its own bourse in July 2023. The Commodity Futures Exchange (CFX) has a remit to “be the national leader in the digital asset infrastructure and set the benchmark for the industry.” As of 2024, crypto exchanges must obtain a PFAK from the CFX to operate legally in the country. In early 2024, there were 29 possible crypto exchanges requiring authorization.
What is the government’s attitude to cryptocurrency?
Historically, the authorities were against crypto, but this stance has softened. The sector is becoming increasingly regulated, and the authorities are working to try to ensure better user safety.
In terms of regulation, the central bank, Bank Indonesia, and the Financial Services Authority or Otoritas Jasa Keuangan (OJK), govern the cryptocurrency and blockchain sectors, the former taking a macro view, the latter regulating financial institutions.
In July 2023, the authorities launched CFX, a state-backed cryptocurrency exchange designed to enhance transparency as well as better protect investors. Here trading activity is divided from clearing and custody functions, which the authorities oversee. This offers the authorities a great deal of visibility into crypto trading activity.
This followed the discovery in May 2023 of more than 300 illicit crypto exchanges operating in Indonesia. Operating outside regulatory oversight, these exchanges left users vulnerable and complicated the authorities’ monitoring and taxation activities.
Reflecting the fact that there are a lot of unseasoned users of crypto, Bank Indonesia, has been holding talks on cybersecurity and digital currency in an effort to better educate users.
How are the authorities approaching regulation?
Bank Indonesia, Bappebti (which falls under the trade ministry) and the OJK (responsible for directly supervising and regulating a broad spectrum of financial institutions) guide the country’s regulation of the financial sector, although supervision of cryptocurrencies will be handed solely to the latter in 2025.
In recent years, the authorities have unveiled several pieces of legislation that shape the operational boundaries of the sector. These include the recognition of digital assets as commodities, guidelines for trading crypto assets, and licensing regulations.
The authorities also require crypto-related enterprises to conduct KYC information. Licensing requirements are in place to vet the financial, operational and security frameworks of platforms. Futures exchanges involved in trading crypto are required to have paid-up capital and follow strict equity standards.
Profits from the trading of crypto are subject to both income and value-added tax, at rates of 0.1% and 0.11%, respectively.
More recently, the OJK created a regulatory sandbox, which it’s using to try out new financial technologies, before they can be offered to the public. It offers a clear sign that the government is serious about digital assets and want to make sure that regulation and the future of the sector head in the right direction.
Timeline of regulation
Initially, cryptocurrencies fell under the 1997 Law Number 32, which related to Commodity Futures Trade. Here, crypto assets were classified under the jurisdiction of Bappebti.
In 2017, Bank Indonesia issued a statement in which it prohibited the use of cryptocurrencies as a means of payment.
The following year came Law Number 99 – General Policy for Implementing Crypto Asset Futures Trading. This defined crypto assets as commodities, allowing them to be traded and bringing them under formal oversight.
In 2019, Bappebti released trading rules specific to crypto exchanges. This was followed up in 2021 with Bappebti Law Number 8 – Guidelines for Organizing Physical Market Trading for Crypto Assets on the Futures Exchange. This sets out operational guidelines for platforms and traders with the intention of further enhancing oversight and consumer protection.
Dual taxation on crypto transactions was introduced in 2022, with taxation rates of 0.1% on income tax and 0.11% on local exchanges imposed.
In 2023, the crypto assets were reclassified as digital financial assets under Bappebti Law Number 4 – Development and Strengthening of the Financial Sector (also known as the Financial Omnibus Law). This essentially added another layer to existing legislation, reclassifying crypto assets as digital financial assets. Furthermore, it shifted regulatory oversight from Bappebti to the OJK (effective January 2025), thereby further integrating crypto assets into the financial services’ regulatory framework.
In July the same year, Bappebti issued the first of several licenses to cryptocurrency exchanges, helping to institutionalize crypto asset transactions in Indonesia’s financial system.
Outlook
Continued regulation has resulted in considerable speculation as to how the situation will develop in Indonesia. With crypto set to fall under the oversight of OJK, it is possible that crypto may be further regulated as a financial security, which would point to lesser taxation. It’s also possible that the taxation of crypto will alter, with transactions potentially just falling under income tax.
The Indonesian authorities are putting a lot of thought and attention into how they regulate the sector, and the country is shaping up to become a model for managing high levels of crypto growth safely. Like many other nations with high crypto adoption, the authorities are treading a cautious line between regulating the sector and encouraging its continued development.
For some, the regulation is too much. For example, to date, the authorities have only issued three currency exchange licenses for crypto, with some arguing that it risks creating a situation where only big players can operate at the expense of middle-sized platforms. For others, however, the protection of those with crypto assets is of paramount importance, with regulation and greater education the best options. And as increasing numbers of exchanges register with CFX, the authorities will be able to better monitor cryptocurrency transactions.
