All cryptocurrency firms must pass through the regulatory sandbox introduced by authorities or be considered illegal in Indonesia.
Crypto firms looking to operate in Indonesia must pass through a regulatory sandbox before they receive licenses from the country’s Financial Services Authority (OJK). The OJK will consider any firm that offers cryptocurrency services without going through the sandbox illegal.
Indonesia’s Sandbox to Educate and Protect Customers
In a media briefing on Tuesday, the OJK’s Head of Supervision Hasan Fawzi said the move is needed to properly protect customers. “This aligns with our spirit at OJK, particularly in consumer protection and education. We expect our regulatory mechanisms to directly impact the prevention of fraudulent investments,” Fawzi said.
A regulatory sandbox is an environment controlled by government authorities where businesses and corporate organizations can test products and services for experimentation while ensuring regulatory compliance. This helps regulators to properly understand the implications of new products, services, and technologies before full-scale implementation.
Indonesia is continuously ramping up regulatory efforts aimed at governing its cryptocurrency industry. Last year, the government announced that all crypto exchanges operating in the country must register with the Commodity Future Exchange (CFX), a new stock exchange launched last January.
By January 2025, the OJK will take over the regulatory and oversight functions of Indonesia’s crypto industry from the Commodity Futures Trading Supervisory Agency (Bappebti). Currently, Bappebti’s role as the regulator tallies with crypto’s classification as commodities. The transfer to OJK’s purview may reclassify crypto as a financial instrument.
Last week, Bappebti disclosed a surge in the volume of crypto transactions in February, hitting 30 trillion Indonesian Rupiah, about $1.92 billion. The agency also noted that the number of registered crypto investors increased by 170,000 users to 19 million in February. According to Bappebti, the increase comes from positive sentiments in the crypto market, including rallies across Bitcoin and altcoins. According to Tirta Karma Senjaya, the head of the agency’s market development bureau, the agency is now anticipating a rally. Bappebti hopes the country’s volume of crypto transactions this year will match the $51.28 billion recorded during the 2021 bull run.
Cryptocurrency Landscape in Indonesia
To support crypto adoption and application in the country, Bappebti recently asked the Ministry of Finance to reconsider its crypto taxation law. Despite the jump in Bitcoin, the country’s tax revenue fell last year by 62% compared to 2022. Total tax generated from crypto transactions in 2023 came to $31.7 million Indonesian Rupiah, about $31.7 million.
A new tax regime introduced in May 2022 imposed a 0.11% value-added tax (VAT) and 0.1% income tax on crypto transactions. Also, local crypto exchanges remit 0.04% to the CFX.
The crypto landscape in Indonesia recorded a win after crypto-friendly candidate Prabowo Subianto won with nearly 60% of the votes. The former defense minister, and his running mate Gibran Rakabuming Raka, plan to ensure more tax compliance among crypto traders in the country. They also intend to support young blockchain experts with their efforts at innovation in the sector.
Subianto and Raka’s victory in the election could be considerably bullish for the cryptocurrency clime in the country. Indonesia reportedly has more registered crypto investors than traders in the traditional stock market.
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