Maybe Indonesia will become a starter country that supports cryptocurrencies including bitcoin, so that other developing countries start to adopt bitcoin too. There will be many hurdles for sure, but the Indonesian government's decision to launch their own local exchange is a bold and willing one to accept crypto as a valuable digital asset. Even though it is centralized and requires KYC, it is everyone's choice. There are facilities provided by the government to trade legally so that it does not violate the rules that have been set.
The awareness of Indonesian citizens with the presence of an exchange facilitated by the government will directly have a positive impact, especially for the investors I have mentioned above in responding to the OP topic.
I agree that this is a brave decision to make even though it is still in its early stages after so much planning.
The government needs to expand education to citizens about crypto, including KYC issues, even though KYC is everyone's choice.
I am not sure if they need KYC all that much. They are the government so if you provide them with just your ID and nothing more, then that's KYC enough, they do not need anything else. Hell I am sure that you do not even need images, just ID number would be more than enough. That should be the case in every single approach and also if they can educate people more about bitcoin then they should start with how to store it safely and show them how they store it safely.
If people can trust the exchange then they will keep their money in there, sure it is "not your keys not your money" type of situation but this time around we are talking about a whole government and that should mean that they would be capable of protecting it better.