The bank warned that virtual currencies cannot be used for payments in the country, warning parties "parties not to sell, buy, or trade" them.
The bank stated that cryptocurrencies are not a "legitimate instrument of payments" as they do not comply with the 2011 Currency Act, which states that payment transactions have to be in Rupiah.
"Currency shall be money of which issued by the Republic of Indonesia and every transaction that has the purpose of payment, or other obligations which need to be fulfilled with money, or other financial transactions conducted within the territory of the Republic of Indonesia, has to be fulfilled with Rupiah."
Payment and FinTech operators are therefore not allowed to make transactions using virtual currencies.
"As payment system authority, Bank Indonesia affirms that it forbids all payment system operator (principal, switching operator, clearing operator, final settlement operator, issuer, acquirer, payment gateway operator, electronic wallet operator, money transfer operator) and financial technology operators in Indonesia, both bank and nonbank institution, to process transactions using virtual currency."
The bank also warned of high risks of investing in cryptocurrencies, including high volatility and being caught in a bubble.
It said that the activity was "loaded with speculations" and advised people not to dabble in them.
"All things considered, Bank Indonesia warns all parties not to sell, buy, or trade virtual currency."