According to the Crypto Council for Innovation, cryptocurrency use cases in Indonesia are especially diverse, driven by financial inclusion needs, a large interest in digital assets, and the high smartphone penetration rate. With a banking system that is still developing, cryptocurrencies offer a decentralized means to store funds and conduct transactions.
Indonesia’s younger generations are its biggest crypto users. This trend has accelerated since March, when the Indonesia Stock Exchange (IDX) introduced full call auction (FCA) measures. By imposing stricter rules for a stock to be considered, some people have been looking for other trading options, including crypto, the Crypto Council for Innovation said.
Data compiled by Chainalysis show that from July 2023 to June 2024, more than a third (43%) of value received by local exchanges in Indonesia came from transfers of US$10,000 to US$1 million. It is possible that professional trading activity drove these flows. However, Indonesia also has a higher share of transfers of US$1,000 to US$10,000 than any other Southeast Asian markets Chainalysis surveyed. These smaller flows are likely to be due to retail trading activity.
“Indonesia’s burgeoning Web3 market has also produced interesting trends during the time period studied,” Chainalysis noted. For instance, Indonesia has a higher share of both decentralized exchange (DEX) and decentralized finance (DeFi) activity than those of other countries in the region, as well as the global average.
Meanwhile, Indonesian regulators have generally been supportive of crypto as an investment class, but not for payments. Bank Indonesia banned payment processors from using cryptocurrency to settle transactions in 2016 and in late 2017 prohibited financial institutions from using crypto for payments. During the crypto bull market that ended in 2021, the Indonesian central bank even mobilized official supervisors to enforce the ban on financial institutions using crypto assets as a means of payment.
It remains to be seen if Indonesian regulators are willing to take steps to better integrate cryptocurrency with the mainstream financial system. But there are reasons for optimism given strong market demand, the country’s financial inclusion needs and their measured approach to date.