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8/1/2023 3:00 PM
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Urgent need to Amend Indonesian Currency Laws to Face the Digital Era


By Danny Hermawan

This journal discusses Indonesia's Currency Act (No. 7) of 2011.  Information technology has developed so rapidly over the past several years that we must reassess whether this law is still relevant now and moving forward.  Technological development has presented new problems ranging from a lack of regulation concerning electronic money (e-money) to the use of non-rupiah currencies as payment instruments.  Such circumstances prompt the need to amend laws, while demonstrating the importance of establishing unambiguous laws to clearly regulate digital money or electronic money.

The rupiah is the official currency of the Republic of Indonesia, as regulated by the Currency Act (No. 7) of 2011, stipulating that the rupiah must be respected and honoured by all Indonesian citizens as a symbol of state sovereignty in the Unitary State of the Republic of Indonesia.

Globalisation has precipitated numerous developments around the world, especially in terms of information technology.  Such developments have induced rapid innovation, which is not always anticipated optimally.  Consequently, a mismatch has emerged between the current legislation and ongoing innovation.  This is clearly the case in Indonesia, where regulatory gaps have not been filled, leaving broad ambiguity in the implementation of norms in the field of currency.

The first issue is the regulation of electronic money and digital currencies.  Electronic money can be defined as a means of payment in electronic form where the value of the money is stored on a specific electronic medium.  Over time, electronic money has become more popular because consumers always want more convenience, speed and practicality.  Looking at prevailing laws and regulations, however, the rupiah is categorised narrowly as just banknotes and coins.  Electronic payment instruments as legal tender are not regulated in the Currency Act.

Although electronic money is regulated in accordance with Bank Indonesia Regulation (PBI) No. 11/12/PBI/2009, this contradicts the mandate of Article 23B of the 1945 Constitution, stipulating that the 'types and prices of currency shall be determined by law', not by a Bank Indonesia Regulation (PBI) or Bank Indonesia Circular Letter (SEBI).  This has created legal uncertainty regarding the use of electronic instruments for payments.  Does the use of these instruments have a sound legal basis?  In addition to electronic money in the form of financial technology (FinTech), cryptocurrency must also be defined as a currency or means of investing to ensure its use is regulated by the monetary authority.

Regarding the use of certain non-rupiah goods as a medium of exchange in lieu of currency, bartering is commonplace in several regions of Indonesia using mediums of exchange in the form of bamboo, wood, animal hides, bones and various other goods.  Bartering, however, is unregulated and not authorised explicitly in accordance with the Currency Act.  Based on such a narrow scope, bartering itself does not contravene the Currency Act.  A broader interpretation implies that the transacting parties have the freedom to determine the obligations based on their own agreement.  It is legal, therefore, if both parties agree to use goods as a medium of exchange.

If we assume that bartering is just an agreement where the barter system is implemented in accordance with the agreement of both parties, bartering does not violate the Currency Act.  In addition, the barter system does not use foreign currencies, which is forbidden under domestic law.  The barter system remains in use in various regions of Indonesia, such as the Flores Market in Alor and Lok Baintan Floating Market in South Kalimantan, and in the modern world, including asset acquisition in the form of debt settlement or exchange of corporate debt into shares.  Using barter in the context of a contract, or as an exchange agreement of goods owned by legitimate party, different mediums of exchange are permissible when used not as currency but as a coupon or voucher.  Bartering, therefore, is permitted if: (i) the construction of the goods should be as used in barter and not currency, (ii) the goods can be purchased or exchanged for rupiah as vouchers or food coupons, and (iii) this is only applicable in certain regions and not as legal tender.

There is also the issue of using non-rupiah currencies in several regions of the Republic of Indonesia.  Acknowledging that foreign currencies are used for transactions in various regions of Indonesia, this clearly violates the provisions of the Currency Act which explicitly states that using foreign exchange (forex) violates the law.  The use of forex is only legal if preceded by an agreement, implying that the Currency Act contains exemptions that allow forex use under limited circumstances.  In reality, the use of non-cash and forex in certain areas, such as border areas, will not stop because it meets the needs of the local community. Nevertheless, it is important to prevent people from rejecting the rupiah in order to maintain its sovereignty in the territory of Indonesia.

Finally, consumer protection issues related to payments.  This refers to cases where consumers cannot pay for facilities, such as toll roads, using cash. Under such circumstances, consumers should still be permitted to pay for toll roads using cash, thereby necessitating two toll gates so cash can still be accepted.

​Electronic money and cryptocurrencies have the ability to meet the convenience and efficiency requirements demanded by the market.  The provisions stipulated in the Currency Act are restrictive concerning the use of rupiah in transactions in Indonesia.  Consequently, the current law must be amended to accommodate the use of digital money in the Republic of Indonesia.  Amendments to the Currency Act are required, therefore, to address development needs moving forward as follows: (i)  expanding the definition of the rupiah beyond banknotes and coins to include electronic money, (ii) facilitating electronic/digital-based payment instruments as legal tender, such as those already in broad public use, (iii)  accommodating the innovation of payment instruments used by the public to improve transaction efficiency and ameliorate social welfare, (iv) refining clearer regulations concerning the barter system or bartering in transactions exempt from rupiah use, (v)  relaxing the mandatory use of the rupiah in the era of the global economic community, (vi) developing information technology that gives rise to digital money will also disrupt other electronic-based financial transactions, (vii) adding electronic/digital money provisions to the Currency Act, including the definition, implementation, type, and nature of electronic/digital money that can substitute currency, (viii) adding regulations concerning implementation of a barter system in specific areas with the  stipulation that the system only applies to the local communities concerned, and (ix) increasing oversight and law enforcement for violations of the Currency Act that still occur in the community.



Nefi, A., & Sardjono, A. (2021). The Urgent Need to Amend the Indonesian Law on Currencies to Face the Digital Age. Journal of Central Banking Law and Institutions, 1(1), 23–46.



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