Government regulation is a sensitive subject for cryptocurrencies. Its position as a new instrument, accompanied by rapid price fluctuations, has made some parties doubt the legality of activities related to crypto assets.
This condition also applies in Indonesia. There is a lot of slanted news about the legality of crypto assets in the country, thus making people stay away from this one asset.
So, what is the position of cryptocurrency in the eyes of Indonesian regulations?
Answering Questions About Cryptocurrency Legality in Indonesia
1. Are Cryptocurrencies Legal as Investments/Trading Assets?
The answer is yes.
Crypto Asset Trading was legalized in September 2018, when the Ministry of Commerce approved the trading of Bitcoin (BTC) and crypto assets as commodities. Furthermore, the Commodity Futures Trading Regulatory Agency (Bappebti), which acts as a regulator of domestic commodity trade, then prepares regulations for crypto assets and blockchain in the country.
This was then embodied in Bappebti Regulation No. 5/2019 concerning Technical Provisions for the Implementation of the Crypto Asset Physical Market on the Futures Exchange. For more detailed rules, you can download it here.
The regulation was then supplemented a year later through CoFTRA Regulation No. 7/2020 concerning the Establishment of a List of Crypto Assets that can be Traded in the Crypto Asset Physical Market.
If the previous rules regulate the basics of trading crypto assets, this rule actually describes 229 types of crypto assets that can be legally traded in Indonesia. This regulation is needed to protect Indonesian investors from crypto asset trading fraud.
2. Are Cryptocurrencies Legitimate as a Medium of Exchange?
The answer is no.
Although the exchange of crypto assets is legal in Indonesia, Bank Indonesia still does not recognize crypto as a means of payment.
This is confirmed in Law no. 7 of 2011 concerning Currency. Article 1 of the regulation states, “currency is money issued by the Unitary State of the Republic of Indonesia, hereinafter referred to as Rupiah.”
This is considered one of the big problems in terms of wider crypto adoption. In addition, many banks are reluctant to open accounts related to crypto trading, and there is still a lot of misinformation about the nature of cryptocurrencies.
However, a limited number of businesses have started accepting crypto payments, including:
- ESO Trans Digital: ESO Trans Digital is a platform that uses blockchain and NFC technology to facilitate payments and transactions. Users can pay for goods and services with crypto via QR Codes and other payment options.
- Nobi: Nobi is a blockchain savings platform that offers users on their crypto assets. Users can deposit, store and stake crypto assets to earn rewards on their mobile app.
- BCS Technology: BCS Technology is a blockchain consulting firm that builds projects. The company accepts crypto payments for its services.
Some anticipate that the government will eventually change the classification of crypto assets from commodities to digital assets. Moreover, Bank Indonesia itself has also planned to release a digital rupiah currency or Central Bank Digital Currency (CBDC).
3. Are There Regulations on Cryptocurrency Taxation in Indonesia?
The answer is not yet.
However, the Directorate General of Taxes at the Ministry of Finance said it would further explore what types of taxes would be applied. So far, the agency said the government could levy two types of taxes on cryptocurrency trading activities. Namely, Value Added Tax (VAT) and Income Tax (PPh).
The Directorate General of Taxes reasoned that the imposition of VAT of 10% is possible if cryptocurrency is considered a currency or medium of exchange for goods/services.
On the other hand, the government can also impose income tax on crypto assets if the owner uses it as an investment instrument.
The Directorate General of Taxes argues that crypto assets are now traded like investments in the stock market. So, there should be income tax withdrawn from capital gains, aka the difference between the initial price of the crypto asset and its selling price.