Indonesia: Virtual Currency Is Here, So How Is Indonesia Going To Regulate It?

Last Updated: 19 November 2018
Article by   SSEK
Most Read Contributor in Indonesia, September 2019

Virtual currency, or cryptocurrency, has made its way to Indonesia and government agencies are working to regulate its use. But as Bitcoin, Ripple, Peercoin and other virtual currencies increasingly attract the interest of Indonesians for all kinds of reasons, there is no regulation in Indonesia that deals specifically with virtual currency, a gap regulators hope to close.

Existing Regulations

Although there is as of this writing no specific regulation in Indonesia for virtual currency, a number of regulations can be viewed as relevant to and briefly touch on the subject of virtual currency. Law No. 7 of 2011 regarding Currency (the "Currency Law") provides that Indonesian Rupiah is the only lawful currency in Indonesia, and that any transaction in Indonesia for the purpose of payment, the settlement of other liabilities that must be settled with money, and/or other financial transactions must use Rupiah.

A definition of virtual currency can be found in Bank Indonesia Regulation Number 18/40/Pbi/2016 regarding Provision of Payment Transaction Processing, dated November 9, 2016 ("BI Reg. 18/40"). Under BI Reg. 18/40, "virtual currency" shall mean digital money issued by a party other than the monetary authority obtained by way of mining, purchase or transfer of reward, and includes Bitcoin, BlackCoin, Dash, Dogecoin, Litecoin, Nxt, Peercoin, Primecoin, Ripple, and Ven. Not included in this definition of virtual currency is electronic money. A similar definition of virtual currency can be found in Bank Indonesia Regulation Number 19/12/PBI/2017 regarding the Provision of Financial Technology, dated November 30, 2017 ("BI Reg. 19/2017").

BI Reg. 18/40 provides that Payment System Service Providers (Principals, Switching Providers, Issuers, Acquirers, Payment Gateway Providers, Clearing Providers, Final Settlement Providers, Fund Transfer Providers, and Electronic Wallet Providers) are prohibited from conducting payment transaction processing using virtual currency. And BI Reg. 19/2017 prohibits Financial Technology (Fintech) Providers from conducting payment system activities using virtual currency, based on the view that virtual currency is not a lawful payment instrument in Indonesia.


Under BI Reg. 18/40, Payment System Service Providers that violate the prohibition on the use of virtual currency in payment transaction processing are subject to administrative sanctions in the form of a warning, fine, temporary suspension of  some or all payment system services, and/or revocation of their license as a Payment System Service Provider. BI Reg. 19/2017 provides sanctions in the form of written warnings and/or removal from Bank Indonesia's list of registered Fintech Providers. And the Currency Law stipulates that a party that does not use Rupiah for every transaction as required in Indonesian territory shall be subject to criminal sanction of maximum imprisonment of one year and a maximum fine of two hundred million Rupiah.

View of the Indonesian Government

It seems clear that the use of virtual currency for payment purposes is prohibited under Indonesian laws and regulations. However, the existing regulations do not seem to cover the selling and purchasing of virtual currency as a commodity or the provision of virtual currency trading platforms in Indonesia. While there currently are no regulations covering these issues, Indonesian government agencies have issued a number of press releases to address the topic.

Bank Indonesia issued a press release dated January 13, 2018, on its official website. The central bank's message is clear from the title of the release: "BI Warns All Parties to Not Sell, Purchase or Trade Virtual Currency." In essence, the warning is based on the following views:

  1. Virtual currency is not a currency
  2. The exchange rate of a virtual currency can easily fluctuate and therefore virtual currencies are vulnerable to bubble risks;
  3. There is no authority that is responsible for virtual currency and there is no official administrator;
  4. There are no underlying assets that serve as a basis for the value of virtual currency; and
  5. There is a lack of consumer protection.

The Bank Indonesia release also raised concerns over money laundering and the funding of terrorism with regard to the use of virtual currency.

The Indonesian Ministry of Finance ("MOF") has also issued a warning over the use of virtual currency in Indonesia. The MOF press release was issued on January 22, 2018, with the title "Warning Against the Use of Virtual Currency in Indonesia." In its release, the MOF said that:

  1. The use of virtual currency as a transaction instrument has no formal basis, the MOF supports the policy of Bank Indonesia to not acknowledge virtual currency as a lawful payment instrument, and it is thus prohibited to use virtual currency as a payment instrument;
  2. Since there is no authority that regulates and supervises virtual currency, virtual currency is vulnerable to illegal transactions, money laundering and the funding of terrorism; and
  3. The speculative nature of virtual currency has the potential to disrupt the stability of financial systems.

The Indonesian Financial Transaction Reports and Analysis Center (Pusat Pelaporan dan Analisis Transaksi Keuangan or "PPATK"), the government watchdog for suspicious financial transactions in Indonesia, also issued a press release, on February 12, 2018, on its official website. The release, titled "Beware of the Use of Virtual Currency," discussed several main points related to virtual currency:

  1. PPATK is prioritizing investigations into transactions suspected to be related to money laundering and terrorism funding by utilizing virtual currency, including through the establishment of a fintech desk and cybercrime division, and by increasing cooperation with Bank Indonesia, the Financial Services Authority (Otoritas Jasa Keuangan or "OJK") and the Ministry of Trade, as fellow members of the National Committee for the Prevention and Eradication of  Money Laundering;
  2. It requires a high-level effort to detect the identity, source of funds and the objective of transactions that use virtual currency;
  3. PPATK welcomes and supports Bank Indonesia's position to prohibit the use of virtual currency in payment transaction processing; and
  4. PPATK calls on the public to be more prudent in utilizing virtual currency, including the utilization of Bitcoin and the like as digital assets, in particular for speculative investment purposes.

In addition to these official press releases, there were reports in the Indonesian media of the OJK shutting down several companies that were conducting initial coin offerings due to a lack of proper corporate licensing and making investment offers with unreasonable rates of return. The OJK shut down several other companies that were conducting illegal investment activities in Indonesia, though they were not necessarily conducting initial coin offerings. The media reports did not say the companies were shut down solely because of the initial coin offerings, and it can't be assumed the companies were specifically targeted rather than simply being caught up as part of the OJK's routine monitoring of illegal investment activities in Indonesia.

Led by Bank Indonesia, relevant government agencies in Indonesia are continuing their inter-agency discussions on the best way to regulate the use of virtual currency in Indonesia. To date, however, no draft regulation has been introduced, so it is still very much a wait-and-see situation.

28 February 2018

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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