Crypto trading activities in Indonesia is generally allowed by the prevailing laws and regulations, despite of the currently prevailing restrictions on the use of cryptocurrencies/ virtual currencies as payment instruments. With the recent surge in popularity of Non-Fungible-Tokens ("NFT"), public interests in crypto assets in Indonesia is on the rise. The legality is often debated and many people are interested to learn more.

In Indonesia, crypto assets are regulated under the following regulations:

  1. Ministry of Trade Regulation No. 99 of 2018 on General Policy for Future Trading of Crypto Asset ("MoT Regulation 99/2018");
  2. Commodity Futures Trading Supervisory Agency (Badan Pengawas Perdagangan Berjangka Komoditi or "BAPPEBTI") Regulation No. 5 of 2019 on Technical Provisions on the Implementation of Physical Market of Crypto Asset in Futures Exchange, as lastly amended by BAPPEBTI Regulation No. 8 of 2021 on Guidelines of the Implementation of Physical Market Trading of Crypto Assets on Futures Exchanges ("BAPPEBTI Regulation 8/2021"); and
  3. BAPPEBTI Regulation No. 7 of 2021 on Decree on the List of Tradeable Crypto Assets in the Crypto Asset Trading Market.

In this article, we will elaborate on the key points of the legal development of crypto assets trading in Indonesia.

A. General Overview on Legality of Crypto Assets and Cryptocurrency in Indonesia

Crypto Assets under Art. 1 Point 7 of BAPPEBTI Regulation 8/2021, are defined as intangible Commodities in digital form, using cryptography, information technology networks, and distributed ledgers to regulate the creation of new units, verify transactions, and secure transactions without the intervention of other parties ("Crypto Assets").

It might raise a question as to whether Crypto Assets have the same treatment, definition, and function to cryptocurrency. It is known that cryptocurrency is a sub-class category of Crypto Assets, but not all Crypto Assets are cryptocurrencies. Cryptocurrency is the store of value and method to transfer that value between the currency users.

Pursuant to Art. 1 (2) of Law No. 7 of 2011 on Currency ("Currency Law"), these provisions regulate the mandatory use of Rupiah in:

  1. every transaction that has payment purposes;
  2. the settlement of other obligations that must be fulfilled with money; and
  3. other financial transactions conducted within the territory of the Republic of Indonesia.

Observing the mandatory use of Rupiah under Currency Law, it can be concluded that both Crypto Assets and cryptocurrency cannot be used as payment instruments in Indonesia since they are not official currency recognized by the country.

This position is also consistent with Art. 34 of Bank of Indonesia Regulation No. 18/40/PBI/2016 on the Implementation of Payment Transaction Processing, which prohibits payment system service providers from processing any transactions using any form of digital currencies.

B. Requirements for Trading of Crypto Assets

Crypto Assets can be traded in Indonesia after fulfilling the following requirements:

  1. the trading activities are carried out on the basis of distributed ledger technology;
  2. the traded Crypto Assets shall be in the form of Utility Crypto Assets or Crypto Backed Assets; and
  3. the traded Crypto Assets have passed the assessment through Analytical Hierarchy Process ("AHP") method as determined by BAPPEBTI.

(Art. 3 (2) of BAPPEBTI Regulation 8/2021)

The AHP mentioned above shall take into account the following provisions:

  1. the market capitalization value (market cap) of Crypto Assets (coin market cap);
  2. the trade is a part of a transaction of Crypto Assets in the world;
  3. the trade has economic benefits, such as taxation, digital economic growth, the information technology industry, and the competence of experts in the field of informatics (digital talent); and
  4. the asset has passed the risk assessment, which include risks of money laundering, terrorism financing, and proliferation of weapons of mass destruction.

Furthermore, the tradeable Crypto Assets are designated by the Head of BAPPEBTI in the list of Crypto Assets. As per June 2021, some 229 Crypto Assets have been approved by BAPPEBTI with 13 registered companies acting as Crypto Asset brokers.

C. Futures Clearing House

A Futures Clearing House can operate in Indonesia after obtaining the approval of the Head of BAPPEBTI, by fulfilling the following requirements:

  1. having a paid-up capital of, at least, IDR 500,000,000,000 (five hundred billion Rupiahs);
  2. maintaining an equity of, at least, 80% of its paid-up capital as referred in Point 1;
  3. having reliable guarantee and settlement system, and is connected to Futures Exchanges, Crypto Asset Physical Traders, and Crypto Asset Storage Managers; and
  4. having a set of rules and regulations for the Physical Crypto Asset Market.

(Art. 9 (2) of BAPPEBTI Regulation 8/2021)

The "reliable guarantee and settlement system" as referred in Art. 9 (2) (c) of BAPPEBTI Regulation 8/2021 shall have the functions of supervising, guaranteeing, and completing the transactions; and ensuring good validation of the balance records and fund transfers for Crypto Asset Customers and the Customers' Assets contained in Crypto Asset Physical Merchants and Crypto Asset Storage Manager for transaction settlements.

D. Crypto Asset Broker

A Crypto Asset Broker acts as a facilitator in Crypto Assets transactions. In this regard, the scope of activities of a Crypto Asset Broker shall, at least, cover:

  1. selling and/or buying facilities of Crypto Assets and Rupiah currency;
  2. exchanging one or more types of Crypto Assets;
  3. managing Crypto Asset Storage owned by the Customer; and
  4. transferring Crypto Assets between wallets.

(Art. 13 (2) of BAPPEBTI Regulation 8/2021)

Prior to the commencing its brokerage activities, the relevant Broker must:

  1. have a paid-up capital of, at least, IDR 80,000,000,000 (eighty billion Rupiahs);
  2. maintain an equity of, at least, 80% of the paid-up capital as referred in Point 1;
  3. have a minimum organizational structure, which consists of the following divisions: Information Technology Division, Audit Division, Legal Division, Crypto Asset Customer Complaints Division, Client Support Division, and Accounting and Finance Division;
  4. have an online trading system and/or facility to facilitate the Crypto Asset Physical Market trading that is connected to the Futures Exchange and Futures Clearing House;
  5. have a set of trading rules;
  6. have a Standard Operating Procedure;
  7. have, at least, one employee who is a Certified Information Systems Security Professional (CISSP), or collaborates with institutions that have experts or directly has a cooperation agreement with experts who are CISSPs; and
  8. have candidates for members of the board of directors, members of the board of commissioners, shareholders, controllers, and/or beneficial owners who have to pass the fit and proper test conducted by BAPPEBTI.

(Art. 14 (1) of BAPPEBTI Regulation 8/2021)

Failure in fulfilling one of the above requirements will result in the imposition of administrative sanctions in the form of cancellation of BAPPEBTI approval. (Art. 48 (3) of BAPPEBTI Regulation 8/2021)

E. Recent Development of Crypto Assets & NFT in Indonesia

Given the relatively active Crypto Assets exchanges in Indonesia, the Indonesian Government is going to launch a centralized Futures Exchange in Indonesia, since there are no Futures Exchange facilities for Crypto Assets trading.

With regard to NFT, the large interest in this sector is not yet regulated, but the prevailing regulations on Crypto Assets as explained in this article will prevail in the NFT market activities. NFT marketplace should comply with the licensing requirements applicable in Crypto Assets exchange activities.

This shall prevail as long as the Indonesian government/ BAPPEBTI has not issued any specific regulation concerning NFT.

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.

Mr Marshall Situmorang
Nusantara Legal Partnership
AIA Central, Level 31, Jl. Jend. Sudirman
Kav. 48 A, Jakarta Selatan, 12930
Jakarta
INDONESIA
Fax: 2127091321
E-mail: mail@nusantaralegal.com
URL: www.nusantaralegal.com

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