- Is Indonesia’s new state-backed crypto exchange the answer to the crypto industry’s scams and fraud?
- With Indonesia’s booming crypto market, what can we expect from the upcoming state-backed crypto exchange?
As the world embraces the potential of digital assets, Indonesian crypto market has joined the race to establish a state-backed crypto exchange by mid-2023. The Commodity Futures Trading Regulatory Agency (Bappebti) revealed that a private-sector company, rather than the government, will run the exchange.
The move comes as the digital asset industry remains fraught with scams and fraud, with the crypto industry losing approximately $4 billion worth of digital assets to hacks, fraud, scams, and rug pulls in 2022. This has prompted the government to take measures to protect investors.
Crypto Market’s Volatile Nature
The volatility of the crypto market has led to many high-profile crypto companies filing for bankruptcy, delivering billions in losses to retail customers. FTX and Singapore-based Zipmex are among the more notable crypto exchanges that failed last year. To address this issue, Indonesia aims to establish a crypto exchange that will separate trading, clearing, and custody under official oversight, much like stock markets. Private-sector crypto platforms will execute trades on the exchange once it is established.
Establishing a Benchmark for a Crypto Bourse
The new state-backed exchange presents a unique challenge as there is no benchmark for such a crypto bourse. According to Didid Noordiatmoko, head of Bappebti, “This could be the first.” He further stated that other state-backed bodies would handle clearing and custody to protect customer assets and avoid any repeat of alleged frauds like FTX.
Tightening Regulations for Crypto Exchanges
In September last year, even before the collapse of FTX, the Indonesian government introduced revisions to tighten regulations over crypto exchanges in the country. The government stated that at least two-thirds of the exchanges’ management “must be Indonesians residing in the country.” Local crypto exchanges need to store client funds in third-party bank accounts, and the government prohibited exchanges from reinvesting crypto assets.
Rising Interest in Crypto in Indonesia
The interest in crypto has been rising rapidly in Indonesia, with crypto asset transactions reaching 859.4 trillion rupiahs (worth around $57.7 billion) in 2021, up 1,224% from 64.9 trillion in 2020. Furthermore, Indonesia ranked 20th out of 146 economies in the 2022 global crypto adoption index from Chainalysis, a blockchain analysis firm headquartered in New York City.
Crypto Industry Hit Hard Following Recent Unfortunate Events
However, the crypto sector in Indonesia has been hit hard following the recent unfortunate events. Monthly trading volumes crashed 95% to $233 million last month from a peak of $4.7 billion in May 2021, according to data from CryptoCompare.
Crypto Adoption to Receive a Boost
Experts believe crypto adoption in Indonesia will receive another boost with the upcoming crypto stock exchange. “The industry will grow, we’ll start seeing more local projects,” Pang Xue Kai, CEO of central Indonesian crypto platform Tokocrypto, had previously said.
In conclusion, the establishment of a state-backed crypto exchange is a significant step towards enhancing investor protection and developing the crypto industry in Indonesia. With growing interest in digital assets, the crypto stock exchange presents a unique opportunity for private-sector crypto platforms to execute trades under official oversight. While challenges remain, the potential for growth and expansion in the crypto market in Indonesia is significant.