January 9, 2023

Indonesia to Launch a National Crypto Exchange

Indonesia to Launch a National Crypto Exchange
  • The Indonesian government will be launching a national crypto exchange as a part of its regulatory reforms. 
  • Cryptocurrencies are quite popular in Indonesia, with the latest estimates of crypto users in the country at around 16 million.
  • Indonesian finance ministry considers cryptocurrencies as an important asset and hence its regulation.   

Indonesia will launch a national cryptocurrency exchange this year as part of its regulatory reform adopted by the Indonesian House of Representatives.

The reform in question was adopted on December 15 as the Financial Sector Development, and Reinforcement bill (P2SK) was approved. 

This move is a stark difference from 2017, when the Indonesian government banned cryptocurrency payment but permitted the trading of virtual assets on legal platforms.

Growing Interest in Crypto

The country has been seeing an increasing interest in crypto, with 16 million cryptocurrency investors reported in 2022 up until December, a significant increase from 11.2 million at the end of 2021. 

The trading volume, in contrast, dropped to around 296.66 trillion rupiahs ($19 billion) last year from 859.4 trillion rupiahs ($55 billion) a year earlier. This could be attributed to the bear market of 2022 following the peak crypto market of November 2021. 

Moreover, 383 crypto assets and ten local tokens can be traded in Indonesia, while 151 assets and ten tokens are under review, according to Bappebti, the country’s community futures trading, as well as the current crypto regulator. 

A Shift in Regulatory Oversight

Besides a national crypto exchange, the reform involves shifting regulatory oversight over the industry from commodities to securities authority. 

According to Suminto Sastrosuwito of the Ministry of Finance, “crypto assets have become an investment and financial instrument, so they need to be regulated on an equal basis with other financial and investment instruments.”

Prior to these reforms, crypto assets were traded under the supervision of the Commodity Futures Trading Regulatory Agency, known as Bappebti. 

Now, as part of a broader financial sector reform, the new policy equips the Financial Services Authority (FSA) with legal support to regulate the industry for the next two years. By this time, the exchange should also be set up, said Bappebti acting head Didid Noordiatmoko.

Introducing Virtual Rupiah

Much like many countries worldwide, Indonesia is also working on a Central Bank Digital Currency (CBDC).

Last month, the Governor of the Bank of Indonesia, Perry Warjiyo, announced the pilot design for the virtual rupiah, which will be open for public discussion soon. 

Warjiyo also published a white paper on CBDC, noting "the future of the central bank is at a crossroads." 

Besides highlighting the country’s progress in terms of CBDC development and what it means for the future of the central bank, the report also raised red flags over unbacked crypto assets and stablecoins, insisting they pose a substantial risk of money laundering and terrorism financing along with "macrofinancial risk in the form of shadow currency and shadow banking that undermine the effectiveness of central bank policy."

Final Not

By undertaking these steps, Indonesia is actually officially embracing cryptocurrencies and providing related services for citizens of the world’s fourth most populous country.