Few markets have been left untouched by the rapid growth in the popularity of crypto currencies and other forms of crypto assets. As governments around the world adopt crypto regulation and policies, Indonesia has evolved a relatively well-defined stance towards crypto assets and is considered reasonably open to blockchain technology. Nevertheless, a solid crypto-asset market has yet to be established here due to the absence of several vital institutional components, including key infrastructure in the form of futures exchanges, futures clearing agencies, and crypto asset storage providers - as per end November 2021, no licenses had been issued by Bappebti for any of these.

To address this, on 29 October 2021 the Commodity Futures Trading Supervisory Authority (“Bappebti”) issued Bappebti Regulation No. 8 of 2021 on Guidelines for the Operation of Physical Crypto-asset Markets in Futures Exchanges (“Reg. 8”).[1] Reg. 8, which focuses on crypto-asset trading and supervision, revokes Bappebti Regulation No. 5 of 2019 (as amended by Bappebti Regulation No. 3 of 2020).

The most significant changes introduced by Reg. 8 relate to (a) licensing requirements; (b) rights and obligations; and (c) the responsibilities of key players involved in the physical crypto-asset market, such as futures exchanges, crypto asset traders, futures clearing agencies, and crypto-asset storage providers. In addition, Reg. 8 also establishes a tighter regulatory framework for trading mechanisms and governance than was previously the case.

In this ABNR Legal Update, we confine our analysis to the crypto-asset trading requirements and the rules governing the licensing of crypto-asset traders that are set out in Reg. 8.

It should be noted that Indonesia continues to ban initial coin and token offerings, and thus these are excluded from the scope of the regulatory framework established by Reg. 8.

Crypto-Asset Trading Requirements

Crypto assets may only be traded if they are approved by Bappebti and listed in relevant Bappebti regulations (e.g., Bappebti Regulation No. 7 of 2020 on the Schedule of Tradable Crypto Assets on the Physical Crypto-asset Market). Reg. 8 sets out the number of specific criteria for market-tradable crypto assets. They must:

  1. be based on distributed ledger technology;
  2. be asset-backed or utility-based;
  3. have been assessed via an analytical hierarchy process implemented by Bappebti that takes into consideration:
  1. crypto asset market capitalization value (coin market cap);
  2. participation in major international crypto asset transactions;
  3. the economic benefits that accrue, such as taxable potential, growth of the digital economy, development of the IT industry, and enhancing individual competencies in the IT industry (“digital talent”); and
  4. crypto-asset risk assessment, including the risk of money laundering and terrorism financing.

Licensing Requirements for Crypto-Asset Traders

Reg. 8 defines Crypto Asset Traders as parties that have been approved by Bappebti to conduct transactions involving crypto-assets, either on behalf of clients or themselves.

When seeking Bappebti approval, a prospective crypto-asset trader must satisfy the following requirements:

Minimum Paid-up Capital

IDR 80 billion (approx. USD 5.5 million)

Maintained Equity

IDR 64 billion (approx. USD 4.5 million)

Other Requirements

  • minimum of one employee is a certified information systems security professional (CISSP) or (ii) cooperation with an institution that has such employees or (iii) cooperation directly with a CISSP-certified person;
  • the boards of directors and commissioners, shareholders, and controller/beneficial owner of the company must undergo a fit and proper test conducted by Bappebti.
  • Bappebti approval is required for a change in management composition, address, name of the company, shareholding composition, system, trading rules, and other changes, including the opening of a branch office.
  • prohibition on engaging in any business other than as a physical commodity trader (single-purpose company).

Registration of Prospective Crypto Asset Traders

Until such time as a futures exchange or futures clearing agency has been licensed by Bappebti, what Reg 8 refers to as “prospective crypto-asset traders” (i.e., prima facie candidates for crypto-asset trader’s licenses) may continue to carry on activities that fall within the scope of crypto-asset trading under Reg. 8, provided that the undertaking in question has applied to Bappebti for registration as a prospective crypto-asset trader and the following requirements are complied with:

Minimum Paid-up Capital

IDR 50 billion (approx. USD 3.5 million)

Maintained Equity

IDR 40 billion (approx. USD 2.8 million)

Other Requirements

Deed of establishment of the undertaking and identity cards of key executives;

Brief description of organizational structure, as well as duties and responsibilities, products, business processes, rules, and code of conduct;

Registration with Bappebti as a prospective crypto-asset trader will remain valid until such time as Bappebti officially licenses a futures exchange(s) and a futures clearing agency(s) to operate in the Indonesian market. When this happens, existing prospective crypto-asset traders must convert their registrations into crypto-asset trader licenses by submitting an application within one month of a futures exchange and a futures clearing aency being licensed by Bappebti. Further, a prospective cypto-asset trader must also fully comply with all of the requirements for a crypto-asset trader’s license within one year of the application for a crypto-asset trader license being submitted to Bappebti.

ABNR Commentary

Reg. 8 is a positive effort by Bappebti to strengthen and develop the crypto-asset market in Indonesia. It aims to: (a) establish clear ground rules for crypto-asset market players without stifling digital entrepreneurship, and (b) protect a public that is rapidly morphing from complete novices to canny investors with a growing appetite for engagement in the crypto-asset market.

Not only have no licenses been issued in Indonesia to date for futures exchanges, futures clearing agencies, or crypto-asset storage providers (as we mentioned earlier), but applicants also seem to be few and far between. This could well be due to the onerous financial thresholds imposed on would-be investors in the form of minimum paid-up capital and maintained equity requirements.

Nonetheless, the lack of domestic participation in this field has not impeded the growth in the popularity of crypto assets in Indonesia. According to the Ministry of Trade, the country had around 6.5 million crypto investors in May 2021 – more than the total number of retail investors recorded on the Indonesia Stock Exchange.