One of the most widely adopted forms of information technology application today is electronic trade through the internet network to make transactions. This transaction system was initially centralized, but with the risk of system failure and hacking, distributed systems such as blockchain were developed to improve security and efficiency. Blockchain also gave birth to derivative technologies such as smart contracts, automated blockchain-based digital agreements. Despite offering many advantages, the anonymity and decentralization of smart contracts raise concerns of misuse for illicit activities such as money laundering. Therefore, regulatory updates in Indonesia are needed to regulate the validity of smart contracts and money laundering actions through this technology. This article analyses the validity and regulation of smart contracts and efforts to implement the AML system in blockchain-based transactions in Indonesia.