Creators in Indonesia are following the non-fungible token (NFT) trend. The popularity of NFT was at an all-time high, especially after the success of Ghozali Everyday by NFT creator Sultan Gustaf Al Ghozali.^[1] Google Trends in Indonesia for the search term "NFT" itself was at its peak when Ghozali Everyday news emerged, resulting in many Indonesians taking advantage of the momentum and selling their own NFT. While this phenomenon indicates a great interest in NFT, it also indicates the need for clear regulation and more widespread education on NFT.

Acknowledgement of NFT is also becoming more evident with Indonesia-based NFT marketplaces such as TokoMall and Paras, adding that many Indonesian creators and public figures have already started selling or buying artworks through NFT.

Forbes stated that the Indonesian tech sector had discovered a new gold rush. This is because projects such as Karafuru, MindBlowon and Superlative Secret Society had recently generated funding with successful non-fungible token mints and communities of NFT had grown in social media.^[2]

^[1] Detikinet:  NFT increasingly famous due to Ghozali, public needs education

^[2] Forbes: The Indonesian NFT Gold Rush

Indonesian law is generally silent on NFT. However, potential investors should be aware of the requirements to conduct business in the NFT marketplace, which is that the marketplace shall be registered with the Ministry of Communication and Information ("MOCI"). Otherwise, the platform will be banned from operating in Indonesia. Currently, MOCI and the Commodity Futures Trading Regulatory Agency of the Ministry of Trade (Badan Pengawas Perdagangan Berjangka Komoditi, "Bappebti") are the authorities overseeing the NFT business in Indonesia.

On the other hand, with respect to cryptocurrency, there are two opposing positions:

1. the Indonesian central bank, Bank Indonesia, through Regulation No. 22/23/PBI/2020 provided that it would later regulate and/or prohibit the use of virtual currency. Previously, Bank Indonesia issued Regulation No. PBI 18/40/PBI/2016 and Regulation No. PBI 19/12/PBI/2017 which prohibit the use of virtual currency; and
2. on the other hand, the Ministry of Trade through Bappebti allows and promotes cryptoassets trading through Minister of Trade Regulation No. 99 of 2018 on the General Policies on the Futures Trading of Crypto Assets. Bappebti currently recognises 229 types of cryptoassets as future trading commodities.

The Development and Enhancement of Financial Sector Bill (Rancangan Undang-Undang tentang Pengembangan dan Penguatan Sektor Keuangan) which is styled as an omnibus law and currently being discussed in the People's Representative Council of the Republic of Indonesia ("DPR") is aimed to address the issues and sentiment towards cryptocurrency.

Additionally, blockchain technology developers and NFT platforms which serve as Electronic System Providers ("ESP") are not subjected to restrictions of foreign ownership requirements.

Artworks are protected with copyrights, and in Indonesia copyrights are regulated under Law No. 28 of 2014 ("Copyrights Law"). According to the Copyrights Law, a copyright consists of:

• moral rights of the creator, which will stay with the creator when the ownership of the artwork has been transferred; and
• economic rights attached to the artwork, which may be transferred outright or in the form of royalty depending on the contract between the transferor and transferee.

As NFTs are currently traded using a smart contract, it is important to ensure the provisions regulating the economic rights of the artwork clearly capture the parties' intention (i.e., what license is granted to the NFT acquirer), to avoid future disputes.

The Directorate of Intellectual Property of Ministry of Law and Human Rights stated that they do not see any problem related to enforcement of the Copyrights Law associated to NFT as the current IP regulatory framework should be sufficient to protect the copyright owners and/or holders.

Under the auspices of the Copyrights Law, one would be at a risk of getting sued and/or prosecution if making an NFT out of someone else's artwork without the author's consent.  

While Bank Indonesia and the Ministry of Trade are having contradicting stances over crypto trading, the Directorate General of Taxation under the Ministry of Finance is gearing up to start taxing trading of cryptoassets.

Additionally, as NFT are often purchased in cryptocurrency, it should be noted that using cryptocurrencies to make purchases is illegal in Indonesia. This is due to the fact that the Indonesian Rupiah is the only acceptable and lawful currency to make transactions in the territory of Indonesia.

On 18 November 2022, President Joko Widodo ratified Law Number 27/2022 regarding Personal Data Protection ("PDP Law").  While this law serves as an umbrella regulation for personal data protection, PDP Law does not instantly invalidate the previous relevant regulations. Nonetheless, PDP Law prevails in case of contradiction with the previous relevant regulations.

Under PDP Law, the personal data controller must prevent leakage of personal data by protecting the security of personal data from access, disclosure, unauthorized alteration, misuse, destruction and loss of personal data in processing personal data.

While Indonesia has introduced the concept of blockchain in the financial services industry regulations, there is currently no comprehensive regulatory framework regarding it. NFT platforms are not specifically regulated either, but they are subject to the provisions on ESP. Furthermore, although Indonesia is yet to establish a data privacy law, MOCI has regulated personal data protection in electronic system. As ESP, NFT platforms are obliged to be registered with MOCI, where one of the requirements during registration is that the ESP must ensure its users' information security and personal data protection. The ways to do this are by ensuring that every time personal data is gathered, processed, stored, distributed, or banished, it is based on the consent of the user. As such, NFT platforms also must establish their own privacy policy.

Additionally, a topical problem that may arise is on the verification of identity and source of funds, as corruption is still at large in Indonesia. There is a concern that the funds used to make the cryptocurrency purchase may be criminal proceeds as there is very minimum personal data and verification needed to start trading.

NFTs are becoming increasingly popular among affluent millennials of Indonesia. Although there are more financial influencers raising awareness about it, it is still unreachable for the majority of the population due to the language and financial barriers. If the government's efforts succeed in increasing the size of the middle class in Indonesia and making Indonesia the world's fourth biggest economy,^[3] there will be more affluent members of the population, which should be directly proportional with the potential for NFT to develop.

With global NFT marketplaces such as OpenSea processing a massive number of transaction from Indonesia compared to other countries in South East Asia,^[4] it is not surprising to see the growth in the number of Indonesian platforms that compete in the NFT market. Tokocrypto – an Indonesian cryptocurrency marketplace – recently launched AZNVerse, an NFT marketplace^[5] that intends to promote the Asian culture.^[6] Indonesia's NFT market even extends to offline channels, with an exhibition that will include NFT auctions set to take place mid-April 2022.^[7] Recently, a musician and activist named Melanie Subono released a song as an NFT^[8] and it is likely that more songs will be released in this way (for example, a new Indonesian NFT platform named Metaroid has just been launched, which aims to sell NFTs in the forms of music, game, abstract art, and other visual art).^[9]

^[3] Cabinet Secretariat of the Republic of Indonesia: Indonesia will be world's 4th largest economy by 2045, President Jokowi says

^[4] Katadata Media: Thanks to NFT, the number of crypto investors in RI is predicted to skyrocket this year

^[5] Liputan6.com: Tokocrypto becomes official partner for AZNVerse NFT project

^[6] Investor.id: Get to know AZNVerse, the first unique NFT project from Tokocrypto that highlights Asian diversity

^[7] Hybrid.co.id: Indo NFT Festiverse exhibition will be held in Jogja, bringing together NFT creators and art collectors

^[8] Koran Jakarta: Be the first, release new songs through NFTs

^[9] Sindonews.com: Metaroid ready to bring the works of Indonesian musicians and artists to become NFT