Web3 in Indonesia: regulatory challenges and development potential

Web3 or Web 3.0 is becoming a topic that is widely discussed around the world, including in Indonesia. This technology, which is considered to be the internet revolution, offers a fundamental change by presenting a more decentralized, transparent and blockchain-based system. However, despite having a lot of potential, Web3 development in Indonesia faces several challenges, especially in terms of regulation. This article will review the regulatory challenges facing Indonesia in Web3 development as well as the huge potential it offers for the national economy and technology.

What Is Web3?

Web3 is an evolution of Web 2.0 that gives users more control in managing their data and activities in cyberspace. Web3 allows users to own their personal data and interact with blockchain-based applications without the need for intermediaries. This is possible thanks to blockchain technology, smart contracts, and cryptography that support systems that are secure, transparent, and independent of a central authority.

Challenges of Web3 regulation in Indonesia

Indonesia as the country with the fourth largest number of internet users in the world has great potential to develop Web3 technology. However, some emerging regulatory challenges include:

Lack of legal certainty currently, regulation related to blockchain and crypto technology in Indonesia is still limited and not comprehensive. While there are already regulations for trading crypto assets, there are no clear guidelines yet for other technologies related to Web3, such as asset tokenization or DAO (Decentralized Autonomous Organization). This lack of certainty makes investors and industry players hesitant to invest further.

Policy differences between Web3 development agencies cover a wide range of sectors, from finance to law to technology. This makes Web3 regulation under several institutions, such as Bank Indonesia (BI), The Financial Services Authority (OJK), and the Commodity Futures Trading Supervisory Agency (Bappebti). Without good coordination, overlapping or conflicting policies can hinder Web3 innovation and development in Indonesia.

Web3 security and fraud risks open up opportunities for people to transact without intermediaries, but this also increases the risk of fraud and cybercrime. In recent years, there has been an increase in fraud cases involving crypto assets in Indonesia. Strong security and consumer protection are major challenges for governments in designing regulations to protect the public without stifling innovation.

Lack of understanding and Human Resources the rapid development of technologies such as Web3 requires deep understanding from regulators and policymakers. Lack of knowledge about these technologies can be an obstacle in formulating appropriate regulations. In addition, Indonesia also needs more human resources who are experts in the field of blockchain, crypto, and Web3 technology in general to encourage the development of this industry.

Web3 development potential in Indonesia

Despite the challenges, Web3 offers great opportunities for Indonesia, both in terms of economy and technological innovation. Here are some potentials that can be developed:

Increased financial inclusion Web3 technology enables the creation of more inclusive financial services. Through DeFi (Decentralized Finance) applications, people who previously did not have access to conventional banking services can participate in the digital economy. This will be of great benefit to people in remote areas or communities that do not have access to banks.

Efficiency in business and Public Administration Web3 brings smart contract technology that can be used to improve efficiency in various business processes, such as property sale and purchase transactions, supply chain management, and government administration. These smart contracts eliminate the need for intermediaries and allow automatic execution based on predefined rules. This can speed up the process, reduce costs, and minimize the risk of fraud.

Local asset tokenization Web3 enables asset tokenization which is the process of converting physical assets into digital assets that can be traded. This opens up opportunities to transform local assets such as commodities, property, or works of art into digital tokens that can be accessed by more people. This tokenization can also attract foreign investors to invest in Indonesia.

Driving the Creative Economy in the Web3 era, artists, musicians, and creators can leverage NFT (Non-Fungible Token) technology to protect copyright and monetize their work directly. Indonesia, which is rich in culture and art, has great potential to develop an NFT-based creative economy, allowing local artists to directly benefit from their work and introduce it to the global market.

Building a Web3 Start-up ecosystem Web3 development can open up opportunities for Indonesian start-ups to develop new innovations based on blockchain technology. With a supportive ecosystem, Indonesia can become the center of development of Web3 start-ups in Southeast Asia, thus encouraging the growth of the digital economy in the country.

Recommendations to address regulatory challenges

To address regulatory challenges in Web3 development in Indonesia, several recommendations can be considered:

Collaboration between government agencies governments need to strengthen coordination between agencies related to Web3 regulation, so that policies can be aligned and support innovation. Collaboration between Bank Indonesia, OJK, Coftra, and the Ministry of Communications and Information Technology (Kominfo) will help create more holistic and pro-innovation regulations.

Improving technology literacy for regulators and the public regulators and policymakers need to understand Web3 technology in depth in order to formulate appropriate regulations. In addition, people's digital literacy is also important to improve understanding of the risks and potential of Web3.

Support to Human Resource Development and Technology Research the government can provide support in Human Resource Development through training, scholarships, and research programs in the field of blockchain and Web3. This will help create an ecosystem that supports innovation and develops qualified human resources in this field.

Conclusion

Web3 development in Indonesia has many regulatory challenges, but also offers great potential for the digital economy and financial inclusion. With an adaptive regulatory approach and strong coordination between government agencies, Indonesia can leverage Web3 to support sustainable digital economic growth. With its potential, Web3 can be a key driver of digital transformation in Indonesia and provide benefits to the wider community.