Crypto assets are gaining ground in Indonesia. According to the Ministry of Trade, more than 6.5 million people bought or sold cryptocurrencies between January and May of this year.
“We have seen significant growth in the crypto economy. In just a few months, the number of traders has grown more than 50%,” said trade minister Muhammad Lutfi during a webinar on Friday. The transaction volume grew by nearly 470%, from IDR 65 trillion (USD 4.4 billion) last year to IDR 370 trillion (USD 25 billion) in the first five months of 2021.
The number of crypto investors now exceeds that of stock traders, which according to the Indonesian Stock Exchange reached 2.2 million in March of this year. Crypto assets have become the most popular investment class in the country. Currently, 229 legal cryptocurrencies, including Bitcoin and Ethereum, can be traded on 13 platforms registered with the Ministry of Trade’s Futures Exchange Supervisory Board, or Bappebti.
The Ministry of Trade sees the crypto sector as an opportunity. “We need to make sure that crypto trading is well-regulated,” Lutfi said. “Crypto assets have enormous potential to help boost the growth of domestic startups. If we don’t manage it, there will be an outflow to foreign countries.”
Officials pointed out that strong regulations are needed to prevent cryptocurrencies from being used to launder money or finance terrorism. Lutfi said that the ministry is currently running a policy sandbox with the objective to better protect and regulate crypto trading activities, and that it will simultaneously formulate new regulations. The ministry is also working closely with other authorities such as the central bank and the regulator for the financial sector, OJK.
Last week, the head of Bappebti, Indrasari Wisnu Wardhana, said that cryptocurrencies will never be a means of legal payment in Indonesia. Bank Indonesia governor Perry Warjiyo also stated that cryptocurrencies are not legitimate payment instruments under the constitution, Bank Indonesia law, and currency law, local media outlet Tempo reported. The central bank is also discouraging crypto investments due to their speculative nature.
Potential misuse
As cryptocurrencies become more mainstream, so too has the rise in scammers trying to take advantage of investors unfamiliar with digital assets. The head of OJK’s Investment Alert Task Force, Tongam Lumban Tobing, said that it has already banned 62 illegal cryptocurrency platforms. “These platforms usually promise a fixed interest, starting from 1% per day or 14% per week,” he said. “There are also platforms that run multi-level marketing or Ponzi schemes to dupe their members.”
Banned actors include E-Dinar Coin, also known as EDC Cash, which required members to pay IDR 5 million (USD 345) upfront. When police arrested the founders in April, they said that around 57,000 people fell prey to the scam. Another fraudulent service, Lucky Best Coin, targeted farmers in West Nusa Tenggara Province, promising a 300% return on their investments.
Wardhana says that Bappebti is currently stepping up efforts for both regulation and education to prevent fraud and other misuse. It is working on a dedicated crypto marketplace, called the Digital Future Exchange (DFX), which is set to start operating in the second half of the year. The Indonesian government is further preparing a framework for the taxation of crypto transactions.