The Indonesian government has given its residents the green light for cryptocurrency trading, refusing to impose an outright ban on all crypto-related transactions.
The government instead will seek to focus its regulatory effort on the prevention of crimes in which cryptocurrency is involved. Cryptocurrencies are treated as tradable assets and commodities, which are unfit for payments, according to the Central Bank.
The government maintains that crypto assets are a volatile asset class, with little backing. Crypto asset trading was legalized in 2018 in the Ministry of Trade Regulation No. 99 of 2018. Typically, crypto assets are traded in a spot market, that is, they are directly transferred between buyer and seller. Spot traders only earn profits on crypto assets if the price of assets goes up. If the price of the asset drops, the trader loses money. Cryptocurrencies are not recognized by the Indonesian constitution, or by central banking laws, according to central bank Governor Perry Warjiyo.
Indonesia’s central bank is in the process of developing its own central bank digital currency with its own crypto exchange by 2021, confirmed by the Deputy Minister of Trade And Industry.
Indonesian crypto trade flourished in 2020 and 2021
The Indonesian crypto trade has seen astonishing transaction volumes over the last 18 months. It has seen transaction volumes in 2020 of $4.5B, while transactions on 13 local exchanges have increased by 40% between January and May 2021.
Local exchanges, such as Pintu and Luno Indonesia, must keep a server with a five-year trading history in the country, and employ at least one security expert.
Luno Indonesia has a user base of around 700,000 and seems confident that that number will increase exponentially. In April 2021, Indodax, which claims to be the largest exchange in Indonesia, claimed a customer base of three million, and the number of individuals involved in trading hit 6.5 million by May 2021. This was up from four million at the end of 2021 and is more than the 5.3 million retail investors registered with the Indonesian Stock Exchange. Other notable exchanges in Indonesia include Tokocrypto, Upbit, and Koinku.
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