Two Sides of a Coin (Bit) | Allen & Overy LLP


All companies involved in crypto assets in the Indonesian market should be aware of regulatory and policy changes from Indonesian regulators – the Financial Services Authority (Otoritas Jasa Keuangan, the OJK) and the Central Bank of Indonesia (Bank Indonesia) .

Regulatory and policy changes are a response to the “unconventional” source of systemic risk facing Southeast Asia’s largest economy. Systemic risk comes from new technologies and new products. These innovations prompted OJK and Bank Indonesia to react.

Indonesia’s Position: Payment Blocked, Allowed as Commodity

Indonesia has seen an increase in the use of cryptocurrency over the past three years. As of October 2021, there were over 9.5 million cryptocurrency investors in Indonesia. This number is increasing.1

Despite the rising numbers, OJK and Bank Indonesia remained cautious. They asserted a strict ban on using cryptocurrency as legal tender in Indonesia. This is in accordance with the Currency Law No. 7 of 2011. Law No. 7 stipulates that the rupiah will be used as legal tender for all transactions in Indonesia.

In its recent public statement, the OJK also prohibited financial services institutions from using, marketing, or facilitating the trading of crypto assets.2 These restrictions have the potential to limit innovation in the cryptocurrency space. In particular, the restrictions limit the development of a larger cryptocurrency payment ecosystem for day-to-day payment activities.

We also note that Bank Indonesia is currently developing a central bank digital currency in response to this financial disruption. The move is in line with research and discussions currently being conducted by other central banks such as the People’s Bank of China and the US Federal Reserve.

Meanwhile, the Indonesian government has taken “middle ground” when considering crypto assets3 as a commodity. This position is affirmed by Ministry of Commerce Regulation No. 99 of 2018, which forms the legal basis for the architecture of the regulatory framework for crypto assets. This regulation states that crypto assets are commodities and are traded through a commodity exchange. The Indonesian Commodity Futures Trading Regulatory Agency (BAPPEBTI) is the authority responsible for supervising and regulating crypto-asset transactions.

The main guidelines issued by the BAPPEBTI for transactions in crypto-assets are stipulated in BAPPEBTI Regulation No. 8 of 2021 – Guidelines on transactions in crypto-assets in the futures markets (Regulation 8/2021). Regulation 8/2021 covers crypto assets and licensing requirements; the rights and obligations of key players (including traders of crypto assets); the role of futures exchanges, crypto asset traders, futures clearing agencies and crypto asset storage providers; and governance.

Business requirements

Under Regulation 8/2021, before a crypto asset can be traded in Indonesia, it must:

  • be based on distributed ledger technology;
  • be utility crypto or asset-backed crypto (e.g. stablecoins); and
  • pass the assessment imposed by the BAPPEBTI.4

Currently, Indonesia’s whitelist of legally traded crypto assets is stipulated in BAPPEBTI Regulation No. 7 of 2020 – the stipulation of the list of crypto assets allowed to be traded in the physical crypto asset market. The whitelists list 229 crypto assets that can be legally traded, including Bitcoin, Ethereum, Tether, and XRP/Ripple.

Due to the growing number of players in the market, we expect BAPPEBTI to modify the whitelist to respond to market development.

An interesting note is that Regulation 8/2021 clearly states that the regulation does not apply to Initial Coin Offerings (ICO) and Initial Token Offerings (ITO). This provision implicitly affirms Indonesia’s ban on ICOs and ITOs, although we note that some Indonesian investors have invested in ICOs and ITOs in other crypto-friendly countries.

Merchant Requirements

Regulation 8/2021 also sets the standards for becoming a crypto asset trader in Indonesia. A crypto-asset trader must be established as a single-purpose business and cannot engage in any other business activity. Before conducting trading activities, a crypto asset trader should:

  • have a minimum paid-up capital of approximately USD 5.6 million in rupees and retain at least 80% of its total paid-up capital;
  • establish a corporate organization including the required divisions, such as information technology, audit, legal, customer service, customer support, and accounting and finance;
  • establish an online trading infrastructure connected to futures exchanges and futures clearinghouses;
  • establish a set of business rules and standard operating procedures for trade and transactions;
  • employ an agent who is a certified information systems security professional; and
  • have a board of directors, a board of auditors, shareholders, controlling shareholders and/or ultimate beneficial owners who have passed the fit and proper test carried out by BAPPEBTI.5

The obligation to obtain the prior approval of BAPPEBTI extends to any change in the composition of management, address, corporate name, composition of shareholding, system, trading rules and other changes. , including the opening of a branch.

As part of its supervision, BAPPEBTI also has the power to have read-only access to the trading system used by a crypto asset trader. This last provision is interesting because it opens up the potential risk of proprietary trading algorithms being disclosed to the regulator. We are not aware of any other country with similar requirements.

There are four types of trading activities that can be conducted by traders of crypto assets in Indonesia under Regulation 8/2021. These are:

  • selling and buying crypto assets in rupees;
  • trading between one or more types of crypto assets;
  • storage of crypto assets held by crypto asset subscribers (i.e. customers); and
  • the transfer or assignment of crypto assets between wallets.

Any other type of trading activity is subject to BAPPEBTI’s prior approval, and any crypto asset transactions are subject to daily and monthly reporting by crypto asset traders to BAPPEBTI.

What the future may bring

Regulation 8/2021 is an all-encompassing single regulation that covers various regulatory issues regarding crypto asset trading activities in Indonesia. This regulation promises to help develop the infrastructure of the cryptocurrency market in Indonesia. However, the country has yet to establish a futures exchange and futures clearing houses for crypto-assets.

We understand that some foreign investors have partnered with local digital and fintech companies. They aim to establish futures exchanges and futures clearinghouses for crypto assets and ultimately grow the cryptocurrency ecosystem in Indonesia. Some crypto asset traders have been successful in raising funds internationally in an effort to expand their business operations and build brand awareness in the market.

While there is still no certainty that crypto assets will be accepted as payment in Indonesia in the future, we are seeing efforts by Indonesian regulators to establish a crypto-friendly ecosystem in the country, even in the absence of regulatory precedent and the strong will of the government. desire to protect retail customers and monitor the fight against money laundering and the financing of terrorism.

It remains to be seen how players in the banking and financial sector will respond to the opportunity and new regulations and how regulators will respond to crypto market activity under the watchful eye of BAPPEBTI.

1. Retrieved from
2. In addition to the OJK statement, in November 2021, the Indonesian Ulema Council (Majelis Ulama Indonesia) issued a fatwa stating that cryptocurrency is prohibited (haram) as a transactional tool. It can only be used as a commodity or digital asset if it complies with Shariah principles, is backed by underlying assets, and has clear benefits for clients/investors. Please note that the fatwa is silent on the definition of “obvious benefit” and therefore opens the door to further interpretation by market participants and customers/investors.
3. Crypto-assets include any type of cryptocurrency and other digital assets based on distributed ledger technology.
4. Assessment is performed using the Analytical Hierarchy Process (AHP). As a general background, AHP is a method for organizing and analyzing complex decisions, using various variables. This process provides a rational framework for a decision by quantifying its requirements and alternative options, and linking these elements to the overall goal. In this case, BAPPEBTI uses variables such as: (a) the market capitalization of the crypto-asset, (b) the use of the crypto-asset in the global market; and (c) the economic benefit for the crypto-asset; and (d) the assessment of risks related to money laundering and terrorist financing.
5. Regulation 8/2021 is silent on how this fit and proper test is carried out by BAPPEBTI and we expect there to be clear guidance issued by BAPPEBTI for the process as what was done by the OJK by issuing a test of fitness and good repute Guideline for the management of banks and financial institutions. On a related note, we understand that BAPPEBTI is currently conducting a fit and proper test for members of the board of directors and board of commissioners of futures exchanges for crypto assets.


Comments are closed.