Cryptocurrency, or digital currency, has transformed the global financial system. Built on blockchain technology, cryptocurrencies like Bitcoin and Ethereum enable secure, decentralized transactions. A vital aspect of this ecosystem is cryptocurrency mining—the process of verifying blockchain transactions while earning crypto rewards. This process not only sustains the network but also offers lucrative opportunities, making it appealing to businesses and individuals.
In Indonesia, however, the regulatory framework for cryptocurrency mining is still unclear. While the sector holds potential, it also presents challenges due to its unregulated nature.
Absence of an Indonesia Standard Industrial Classification (“KBLI”) for Cryptocurrency Mining
Currently, there is no specific KBLI code dedicated to cryptocurrency mining activities. The existing KBLI 66153 pertains solely to providing systems for trading cryptocurrencies as commodities, which facilitates buying and selling activities but does not encompass mining operations. This regulatory gap underscores the absence of a tailored licensing framework for cryptocurrency mining enterprises.
However, given that Minister of Finance Regulation No. 81 of 2024 on Tax Provisions for Implementing the Core Tax Administration System (“PMK 81/2024”) has recognized cryptocurrency mining activities by regulating their tax obligations, licensing procedures for this sector may be introduced in the future. This would provide greater legal certainty for businesses operating in this space.
Tax Obligations Under PMK 81/2024
Despite the lack of a distinct KBLI, the Ministry of Finance has addressed certain aspects of cryptocurrency mining in PMK 81/2024. Articles 353 and 356 of this regulation mandate that cryptocurrency miners are classified as Taxable Entrepreneurs (Pengusaha Kena Pajak) and are thus subject to Value-Added Tax (VAT) and Income Tax (PPh) obligations. This establishes clear taxation requirements for mining activities, signaling the government’s recognition of this sector’s economic implications.
Uncertain Regulatory Framework and Risks
As of now, Indonesia lacks a comprehensive regulatory framework for cryptocurrency mining. This regulatory ambiguity presents challenges for businesses, as engaging in mining activities without proper classification may lead to potential legal risks. Under Article 60, Paragraph (1) letter (b) and Paragraph (2) of Head of BKPM Regulation No. 5 of 2021 concerning Guidelines and Procedures for Risk-Based Business Licensing Supervision (“Perka BKPM 5/2021”), businesses conducting activities that do not align with their designated licensing may face a heavy sanctions, including the revocation of their business licenses. Consequently, entrepreneurs should exercise caution when pursuing cryptocurrency mining under existing KBLI codes not explicitly designed for such operations.
Recommendations for Businesses
Given the current regulatory landscape, businesses intending to engage in cryptocurrency mining are advised to adopt a cautious approach:
Await Regulatory Clarity: It is prudent for businesses to wait until a specific KBLI code for cryptocurrency mining is introduced. This ensures alignment with licensing requirements and mitigates the risk of sanctions. The likelihood of future regulatory developments in this area makes patience a wise course of action.
Seek Legal Guidance: Engaging legal professionals with expertise in cryptocurrency and Indonesian business law can provide invaluable insights into navigating this evolving regulatory environment.
Compliance with Tax Obligations: Ensure compliance with the tax obligations outlined in PMK 81/2024 to avoid penalties and establish credibility with regulatory authorities.
Stay Updated on Regulatory Changes: Schinder Law Firm is committed to staying in the loop for any updates or changes in regulations related to cryptocurrency businesses, including mining. Businesses can rely on our expertise to stay informed and ensure full compliance with emerging legal requirements.
Conclusion
While cryptocurrency mining in Indonesia operates in a legal gray area, businesses must remain vigilant and proactive in understanding and complying with existing regulations. The introduction of taxation rules under PMK 81/2024 suggests a potential future framework for licensing, which could bring much-needed clarity to this sector. By prioritizing regulatory compliance and staying informed about legislative developments, businesses can position themselves to capitalize on opportunities in this emerging sector while minimizing legal risks.
If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of many corporate law firms in Indonesia that has handled numerous similar matters, with many experienced and professional corporate and civil lawyers in its arsenal, making it one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.