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Welcome, crypto assets!
After a long time waiting, Indonesia has finally opened the door to crypto assets, including cryptocurrencies like Bitcoin
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span>After a long time waiting, Indonesia has finally opened the door to crypto assets, including cryptocurrencies like Bitcoin. Just a couple of weeks ago, the Commodity Futures Trading Supervisory Authority (Bappebti) enacted a series of regulations that legitimate and recognize crypto assets as commodities that are eligible to be the subjects of futures contracts or other derivative contracts and could be traded in Indonesian futures exchanges.
The regulations consist of Bappebti regulations No. 2/2019, No. 3/2019 and No. 5/2019.
Through Bappebti Regulation No. 5/2019, the authority attempts to create more legal certainty and protection for crypto asset investors or customers. For example, it requires the crypto assets to meet the minimum specified criteria to be stipulated by the head of Bappebti and to be traded in the physical market, whose procedures are particularly regulated by Bappebti Regulation No. 2/2019.
It also demands the traders have a client support division in their organizational structures, provide offline deposits (cold storage) to avoid any hacking risks and to locate their servers in Indonesia.
Apart from that, Bappebti Regulation No. 5/2019 also specifies the mechanisms of crypto asset trading from the opening of an account to the withdrawal of funds. Before receiving the funds from customers, crypto asset traders must disclose their profiles and any risks that might arise and provide an agreement between the traders and the customers. The funds may only be transferred through the banking system and must be in rupiah.
Also, the withdrawn of crypto assets or funds must be verified by Indonesian derivatives clearing agencies.
The authority is also determined to mitigate the wrongful use of crypto asset trading. Crypto asset traders are obligated to report any suspicious transactions involving crypto assets to the head of Bappebti and any
suspicious financial transactions to the Indonesian Financial Transaction Reports and Analysis Center.
Moreover, the trading mechanisms must contain programs that prevent any activities related to money laundering, terrorism financing or the proliferation of weapons of mass destruction, as stipulated by Bappebti.
Although the regulations received much appreciation and many favorable responses, many crypto asset participants commented otherwise. The requirement of the minimum capital threshold may be the clause that received the most attention.
Bappebti set a minimum Rp 1.5 trillion (US$106.5 million) in paid-up capital for futures exchanges and a minimum Rp 1 trillion in paid-up capital for crypto asset traders to participate in crypto asset trading.
Many participants consider the numbers to be too high given that crypto assets are newcomers to the Indonesian commodities market.
However, the thresholds seem realistic if we look at the high risk and volatile value of crypto assets. As a comparison, Rp 30 billion is required as a minimum paid-up capital for a brokerage company, while a minimum Rp 3 trillion paid-up capital is required to establish a bank.
Dealing with the issue, establishing a joint venture with foreign companies may be one of the solutions to gain more capital. Additionally, being in such a partnership with foreign companies that already have more experience and advanced technology in crypto asset trading would improve business services.
Nonetheless, the protection of local participants should be a priority to steadily speed up the growth of the Indonesian future exchange.
So, can we now use cryptocurrencies like Bitcoin as instruments of payment?
To date, Bitcoin and other cryptocurrencies are still not eligible to be payment instruments in Indonesia. As regulated in Law No. 7/2011 on currency, currency shall be money issued by the government of Indonesia.
Furthermore, any financial transactions, any transactions with the purpose of payment or any obligations to be fulfilled with money, that are conducted in the territory of the Republic of Indonesia must be performed with rupiah.
Moreover, on Jan. 13, 2018, Bank Indonesia, the central bank, issued a press release affirming that virtual currencies, including Bitcoin, are not recognized as legitimate instruments of payment. Therefore, they are not allowed to be used for payment in Indonesia.
Besides, as extracted from the press release, the central bank also forbad all payment system operators (principals, switching operators, clearing operators, final settlement operators, issuers, acquirers, payment gateway operators, electronic wallet operators and money transfer operators) and financial technology operators in Indonesia, with both banks and nonbank institutions, to process transactions using virtual currencies.
However, the press release does not mention cryptocurrency trading in future exchanges.
Finally, like it or not, the penetration of crypto assets into Indonesia is unavoidable. Because of the high risk and volatile value, education and protection of the public are matters that should be continuously provided by the government, future exchanges and crypto asset traders. If the public is well informed, it is not impossible for crypto assets to become the new favorite commodities in the future because of their digitalized nature.
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The writer is a lawyer. He is now pursuing his Master of Law-degree at the Melbourne Law School, Australia.
