Legal Examination of New Money Laundering Schemes Using Digital Assets and Decentralized Finance in Indonesia

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FORMOSA NEWS - Jakarta - Indonesia’s Anti-Money Laundering Laws Face Critical Gaps Against Decentralized Finance and Crypto Asset Schemes. Indonesia’s current anti-money laundering regulations struggle to detect and prevent sophisticated financial crimes conducted through decentralized finance protocols and digital assets. This finding comes from a legal analysis published in August 2026 by researchers Umar Husin from Universitas Nasional Jakarta, alongside Hargianti Dini Iswandari and Indra Yuliawan from Universitas Ngudi Waluyo. The study reveals that traditional legal frameworks depend heavily on centralized financial institutions like banks and registered exchanges. Because decentralized finance operates through autonomous smart contracts without human intermediaries, illicit actors can bypass conventional reporting systems, masking funds across international borders. Understanding these structural loopholes is vital as Indonesia rapidly expands its digital economy, integrates crypto assets into its financial sector, and seeks to protect its financial system from systemic risks.

Background and Context

Digital finance has evolved rapidly over the past decade, moving beyond centralized cryptocurrency exchanges into decentralized finance ecosystems. These open protocols allow peer-to-peer lending, trading, and asset transfers without central intermediaries, managers, or custodians. While these technologies lower transaction costs and enhance financial inclusion, they also eliminate traditional control points used by law enforcement authorities. Indonesia has taken steps to address digital assets. Law Number 8 of 2010 established the foundation for combating money laundering by requiring financial service providers to report suspicious transactions to the Financial Transaction Reporting and Analysis Center. More recently, Law Number 4 of 2023 on the Development and Strengthening of the Financial Sector formally recognized crypto assets and transferred supervisory authority over digital finance to the Financial Services Authority. However, these legal framework updates remain focused primarily on centralized legal entities, leaving automated, non-custodial software protocols largely unmonitored.

Legal Research Methodology
The researchers conducted a normative legal study using a qualitative-doctrinal approach to evaluate the adequacy of Indonesian law. The team applied statutory, conceptual, and comparative legal analysis methods to evaluate positive legal norms against the technical features of decentralized finance. Primary legal sources analyzed included Law Number 8 of 2010, Law Number 4 of 2023, and regulatory guidance issued by the Financial Services Authority and the Financial Transaction Reporting and Analysis Center. Secondary sources included peer-reviewed international journals, global policy reports, and standards set by the Financial Action Task Force between 2020 and 2024.

Key Research Findings
The study highlights several structural gaps in how Indonesian law handles digital asset crime:

• Obsolete Intermediary Assumptions: Law Number 8 of 2010 requires financial service providers to perform Customer Due Diligence and file Suspicious Transaction Reports. In peer-to-peer protocols run entirely by automated code, no central entity exists to fulfill these mandatory reporting duties.
  
• Transformation of Money Laundering Stages: Illicit placement now occurs through direct cash-to-crypto conversion, layering takes place using cross-chain exchanges and automated liquidity pools, and integration is achieved via decentralized payment mechanisms or centralized exit ramps.
  
• Institutional Supervisory Blind Spots: Law Number 4 of 2023 expands state oversight over corporate financial entity actors, but lacks explicit enforcement mechanisms for open-source, non-custodial protocol transactions.
  
• Enforcement and Asset Seizure Barriers: Because users maintain sole control over their private keys, standard state mechanisms for freezing and confiscating illicit financial assets cannot function without user cooperation or technical intervention tools.
  

Implications and Real-World Impact
The findings indicate a need for fundamental reforms in financial regulation. Continuing to rely solely on entity-based oversight leaves significant regulatory blind spots that criminal networks can exploit. To protect national financial stability, policymakers must transition toward activity-based and risk-based regulatory frameworks. Implementing blockchain analytics tools, strengthening international cross-jurisdictional law enforcement cooperation, and regulating fiat entry and exit gateways will allow authorities to monitor illicit flows effectively. These adjustments help safeguard the integrity of Indonesia’s broader financial ecosystem while allowing legitimate financial technology innovation to proceed safely.

Author Profiles
Umar Husin, SH, MH is a legal scholar affiliated with Universitas Nasional Jakarta, specializing in economic criminal law, anti-money laundering legal frameworks, and financial regulation.
Hargianti Dini Iswandari, SH, MH is a legal researcher at Universitas Ngudi Waluyo, focusing on national legal policy, economic law, and regulatory compliance.
Indra Yuliawan, SH, MH is an academic at Universitas Ngudi Waluyo, specializing in financial law, corporate regulation, and technology-driven legal issues.

Source
Umar Husin, Hargianti Dini Iswandari, Indra Yuliawan. Legal Examination of New Money Laundering Schemes Using Digital Assets and Decentralized Finance in Indonesia. International Journal of Law Analytics (IJLA), Vol. 4, No. 3 (2026), hal. 523–536
DOI: https://doi.org/10.59890/ijla.v4i3.237
URL : https://journal.multitechpublisher.com/index.php/ijla/index