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Crypto exchanges seek new horizons in NFTs, lending
‘Long road’ for regulators to approve crypto-backed loans: Expert
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ocal cryptocurrency exchanges are looking into nonfungible tokens (NFTs) and crypto lending as the possible next big things after crypto assets took off last year.
Crypto exchange Tokocrypto launched TokoMall in August and the marketplace has listed more than 8,000 NFTs to date, certifying ownership for digital artwork, such as videos, images and even songs.
“TokoMall will expand its NFT marketplace to include [collectibles] starting next year,” TokoMall head Thelvia Vennieta told The Jakarta Post on Dec. 13, adding that the marketplace also planned to offer merchandise and tickets.
While NFTs are relatively new to the country, cryptocurrency is already booming among local investors. The Trade Ministry said it had recorded around 6.5 million crypto investors in May, noting that crypto investment transactions had grown fivefold in the first five months of the year to more than Rp 370 trillion (US$25.8 billion).
Read also: Indonesia now has more crypto investors than stock market investors
Tokocrypto public relations head Rieka Handayani said that, although the company expected more NFT and crypto projects to emerge in the near future, the industry needed a more detailed regulatory framework to include other blockchain products and services.
“Indonesia only has regulation on crypto assets at the moment. Evaluation is needed in the short term, so regulations can cater to market developments as well as protect industry players and users,” Rieka told the Post on Dec. 13.
She also said that the company had raised the idea to develop a crypto lending product, but that it was still confined to “internal discussions”.
Crypto lending allows borrowers to use digital assets as collateral and sidestep banks, the traditional gatekeepers of loans. It is part of a growing global trend in decentralized finance (DeFi) that seeks to enable financial transactions without intermediaries, like conventional financial institutions.
The product’s growing popularity is indicated by the outstanding debt on crypto loan platforms, which increased more than sixfold year-to-date to $23.3 billion as of Dec. 20, according to industry rankings site DeFi Pulse.
Investors have also tapped into the DeFi market to gain higher return on investments during the pandemic, when central banks across the globe slashed interest rates to spur economic activity.
Indonesian crypto exchange Pintu is also considering offering loan products, according to its CEO, Jeth Soetoyo.
“Obviously, there will be certain regulatory ramifications [with regard to] rolling out a product like that. So that is something we still need to figure out,” Jeth told the Post on Dec. 8.
He also said that Pintu had a plan in the pipeline to establish an NFT marketplace, as NFTs would allow artists and their creations to be globally known.
Pintu announced in August that it had raised $35 million in series A+ funding, and that it planned to use the fund to offer more assets and develop new features on its platform.
Read also: Like royalty: Why Indonesian musicians are turning to NFTs to sell music
Nailul Huda, who heads the Center of Innovation and Digital Economy at the Institute for Development of Economics and Finance (Indef), warned that the lack of regulations on crypto assets would hamper industry growth and increase the risk of their misuse in money laundering, pornography and terrorist financing, cases of which had emerged across the globe.
As for crypto lending, Nailul said it would be an attractive alternative for borrowers in getting fast loans while still holding on to their digital assets.
“If it is to be allowed, crypto lending needs to be overseen by the Financial Services Authority [OJK], but I think it is going to be a difficult and long road for regulators to deliberate on this matter,” he told the Post on Dec. 14.
In the latest sign of how the local industry is growing, Binance, the world's largest crypto exchange, recently formed a joint venture with a consortium led by state-backed MDI Ventures to develop a digital asset exchange in Indonesia.
The consortium aims to tap into the country's over 270 million population, of which only around 2 percent have invested in crypto assets, according to a statement from Binance published last Thursday.
Read also: Binance, MDI Ventures to develop local crypto exchange
The government has been tightening its grip on digital assets to protect consumers. The Trade Ministry’s Commodity Futures Trading Regulatory Agency (Bappebti) announced earlier this year that it would create its own crypto exchange by the year-end.
Bappebti also planned to set up a clearinghouse to support its crypto bourse, keeping 70 percent of traders' funds as reserves and having the ability to freeze funds in the case of default.
