Indonesia’s crypto exchanges face fuzzy future amid new regulations

As markets are buffeted by the crypto winter, the Indonesian government is looking to tighten crypto exchange regulations in the country after months of discussion with industry players.

An important update in the new rules is the increased paid-up capital requirement for trading platforms in the space, which now need to have 100 billion rupiah (US$6.5 million) instead of the current 50 billion rupiah (US$3.3 million).

This was announced last month by Indonesia’s crypto regulator, the Commodity Futures Trading Regulatory Agency (Bappebti).

The development follows a previous decision by Bappebti to stop issuing registration certificates to prospective crypto exchanges. Indonesia currently has around 25 official crypto trading companies under Bappebti.

However, industry sources have said that the restriction on registration certificates will likely be loosened once the upcoming regulations have been put in place.

Sources say the increased paid-up capital requirement has caused concern among smaller companies in the country. That said, many see this as a way to filter out illicit players as Indonesia steps up restrictions on its fintech industry – a move reminiscent of the country’s approach to its peer-to-peer lenders.

Big guys not bothered

Bappebti previously planned to increase the paid-up capital requirement to 80 billion rupiah (US$5.2 million) but backed down partly due to industry pushback, sources say.

This time, there is still resistance, especially from small crypto asset trading platforms that have not made money or have not set up in Indonesia yet.

It’s unclear when the regulations will be imposed, but there is a possibility that Bappebti may delay the implementation of the new regulations, says Joel Shen, partner at global law firm Withersworldwide.

This conversation, he adds, might have been different about a year ago when the industry was growing exponentially and was on a persistent bull run.

“While more onerous restrictions may be necessary for a better-regulated industry, the introduction of such regulations at a time when the market is doing badly may be [poorly] received by some of the smaller players,” he tells Tech in Asia.

While Indonesia has 25 official crypto trading companies under Bappebti, Shen says none of the current crypto asset firms in Indonesia are actually licensed. This is because to be certified, these players need to be members of a centralized exchange, akin to an Indonesia Stock Exchange for crypto.

A centralized exchange performs a quasi-regulatory function. When crypto firms sign up as members, the exchange will issue letters of recommendation before crypto firms receive licenses.

But such an exchange does not currently exist. A source who declined to be named pointed out that doing so would require very high capital as well as technological and track record requirements.

Crypto and P2P lending