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Indonesia Projects Crypto Boom, Moves the Oversight to Financial Services Authority

In the first two months of 2024, the volume of crypto transactions significantly rose. The Commodity Futures Trading Supervisory Agency meanwhile is preparing to transfer crypto oversight to the Financial Services Authority.

Photo by Appai / Unsplash

The Commodity Futures Trading Supervisory Agency of Indonesia (Bappebti) projects the volume of crypto transactions in 2024 to at least reach, and potentially surpass the levels of 2021, when transactions reached almost IDR 860 trillion (over $51 billion). And these big expectations appear to be justified.

The head of Bappebti, Tirta Karma Senjaya, reportedly revealed an increase in transaction volume of around IDR 30 trillion ($1.92 billion) in February. This amount adds to the record value of crypto transactions in January, which was IDR 21.6 trillion, a sign of a big year ahead.

"Transactions have started to increase because Bitcoin and several altcoins have increased in price, so maybe in March they will also increase," - explained Tirta, also pointing at upcoming Bitcoin halving as an important catalyst of increasing prices and trading volume. Earlier in January he stated: "Crypto transactions are like a U curve, transactions in 2022 and 2023 have fallen, so 2024 should increase.”

The number of registered crypto investors also surged reaching 19 million people in February. Interestingly, they significantly outnumber stock traders registered in the country.

Cryptocurrency regulation has some specifics in Indonesia. In 2023, Indonesia launched a national crypto asset bourse (CFX) to provide regulators with transaction records for tax purposes and better protect investors. The bourse lists existing licensed crypto companies as traders. To operate in the country, exchanges must win recognition as legitimate companies linked to the CFX. To date, there are 501 officially registered crypto assets, and 33 registered and regulated traders (i.e. authorized VASPs). 

Bappebti will continue fostering a safe trading environment in crypto until the end of this year, but from January 2025 the Financial Services Authority (OJK) is expected to fully take over.

Financial Services Authority (OJK) is an Indonesian government agency that regulates and supervises the financial services sector.

This transfer might imply major changes to existing laws (and probably move crypto from commodities to securities). Recently, OJK issued new regulations to include guidance for financial institutions on how to implement technological innovations, protect customers, test digital products, and operate digital financial assets, including crypto. These regulations are far from being comprehensive, but OJK is working with financial authorities from Malaysia, Singapore, and Dubai to create better policies across the board. 

The change of regulator will likely affect the current Indonesian tax approach to crypto. Right now, crypto transactions are subject to two taxes: a 0.1% income tax and a 0.11% VAT. Also, crypto exchanges must pay around 0.02% in taxes to the national crypto bourse. Reportedly, the tax revenue in 2023 fell 62% compared to the previous year after the tax regime was first introduced, with local exchanges arguing this drop was clearly a direct result of the taxes. It is highly possible that when crypto oversight is transferred to OJK, digital assets will fall under the same tax regime as securities, and VAT will be eliminated. The head of Bappebti also urged the Financial Minister to review these taxes recently. 

Indonesian leadership seems to be ready to embrace the crypto industry. Recently, Indonesians elected a crypto-friendly president and vice president (who also happens to be the son of the previous president). They will supposedly continue the pro-crypto policy in the country, while we continue to Observe.