Cryptocurrency Boom and Moral Hazard: Testing the Resilience of AML-CFT Regime

Cryptocurrency Trading Growth and Market Significance

Cryptocurrency asset trading in Indonesia is moving at a remarkably rapid pace, often outpacing the governance and supervision ecosystem’s ability to keep up. The scale of growth is no longer speculative in nature.

The Financial Services Authority (OJK) reported that by November 2024, the number of cryptocurrency investors had reached 22.11 million people, with transaction values from January to November 2024 totalling Rp556.53 trillion, surging approximately 376 per cent year-on-year. This figure confirms one critical matter: cryptocurrency has transformed from a peripheral phenomenon into a mainstream feature of the national financial system.

However, this impressive growth presents a dual reality. On one hand, cryptocurrency promises financial deepening, expanded investment choices, and accelerated digital financial inclusion. On the other hand, it opens increasingly wider spaces for moral hazard, unethical practices, and violations of the Anti-Money Laundering and Counter-Terrorist Financing (AML-CFT) regime. When the user base reaches tens of millions and transaction values pierce hundreds of trillions of rupiah, cryptocurrency governance risks are no longer individual in nature but have transformed into socio-economic risks and reputational risks to the national financial system.

This dynamic continued into 2025. According to an OJK press release, by August 2025, the number of cryptocurrency asset merchant consumers stood at 18.08 million, with September 2025 transaction values of Rp38.64 trillion and total transactions throughout 2025 (year-to-date) reaching Rp360.30 trillion.

The OJK also recorded 1,416 tradeable cryptocurrency assets and 28 approved entities in the ecosystem, comprising one exchange, one clearing house, two custodians/depositories, and 24 cryptocurrency asset merchants.

These figures must be read not merely as indicators of market growth, but also as early warning signs. The larger the market, the greater the incentive for violations. Therefore, the crucial question is no longer whether cryptocurrency will continue to grow, but rather: can market integrity and AML-CFT regime effectiveness grow alongside the explosion in transaction volumes?

Moral Hazard Lurking Behind Growth

Moral hazard in the cryptocurrency ecosystem emerges when short-term profit incentives overcome caution and integrity. In practice, this phenomenon manifests in at least four main patterns.

First, information asymmetry. The complexity of cryptocurrency products and platforms is often not matched by adequate transparency. Retail users face fee structures, operational risks, and platform governance that are not fully understood.

Second, conflicts of interest in platform operations. Global experience shows major risks when exchanges simultaneously act as merchants, custodians, or market makers without strong ethical safeguards. Without clear functional separation, incentives to take excessive risks will always exist.

Third, the illusion of anonymity. Although blockchain technology is traceable, the identity behind a digital wallet address is not automatically clear. Without risk-based know-your-customer (KYC) and customer due diligence (CDD), this pseudo-anonymity becomes a gateway for layering and integration practices in money laundering.

Fourth, regulatory arbitrage. Perpetrators of crime can exploit gaps between sectors or jurisdictions, moving funds from payment systems into cryptocurrency, then across borders, before returning to the formal economy as apparently legitimate funds.

AML-CFT: From Compliance to Reputation Protection

In the modern financial system, AML-CFT is not merely an administrative obligation. It is an instrument for protecting integrity and reputation. The challenge facing Indonesia’s cryptocurrency sector is not the absence of regulations, but rather the quality of implementation and consistency of supervision.

Perfunctory KYC is insufficient. Transaction monitoring based solely on large values is also easily circumvented through structuring schemes (repeated small transactions), rapid transfers between wallets, and chain hopping. Without an early warning system (EWS) based on analytics and pattern mapping, suspicious transaction reporting will always lag behind.

In this context, AML-CFT must be understood as a mechanism for preventing reputational risk. When money laundering escapes from one node to another, what is eroded is not merely funds or direct victims, but public confidence in the overall financial system.

Moral Hazard: A Repeating Global Pattern

Global experience demonstrates a consistent pattern. The collapse of FTX in the United States, the PlusToken Ponzi scheme in China, and the downfall of Thodex in Turkey all revealed a combination of key-man risk, conflicts of interest, weak governance, and AML-CFT failures. In many cases, these “crypto bosses” misappropriated customer funds or exploited cross-jurisdictional gaps for money laundering and massive fraud resulting in losses in the billions of US dollars.

The lesson is clear: the main issue with cryptocurrency is not the technology itself, but the integrity of the people and institutions managing it. When cryptocurrency grows faster than oversight, it has the potential to become a new nexus for global financial crime.

The BI-FAST Case: A Real Cross-Ecosystem Warning

The case of bank account breaches in Jakarta using transactions through the BI-FAST application valued at over Rp200 billion serves as the most concrete illustration. It is important to emphasise that this case did not originate from the BI-FAST system itself, but rather from weaknesses in the related bank’s internal application, which has now been remedied.

However, in the context of moral hazard in cryptocurrency transactions, law enforcement agencies revealed that the proceeds of crime were allegedly funnelled and laundered through cryptocurrency assets before eventually being traced and frozen.

This case delivers a very clear message. First, modern financial crime operates across ecosystems. Payment systems, cryptocurrency platforms, and formal banking channels are increasingly being weaponised in coordinated schemes. Second, the investigation capabilities and inter-agency coordination remain crucial but must be strengthened with real-time analytics and cross-platform monitoring. Without this, the speed of modern crime will continue to outpace enforcement responses.