Challenges and Opportunities of "Decentralization Finance" in Indonesia

DeFi or decentralized finance is becoming an interesting trend among a wide variety of crypto innovations. One that accommodates the presence of DeFi is the TokoCrypto platform. To discuss it in depth, DailySocial Presenting the COO of TokoCrypto Teguh Kurniawan Harmanda, who is familiarly called Manda, in the #TuesdayStartup session.

In her presentation, Manda explained that DeFi is one of the categories of crypto asset token types circulating in the world. The result of the transformation of the financial industry with the aim of being able to provide open and transparent services to the public without intermediaries (permissionless).

DeFi generally goes with Smart contract on the Ethereum (ETH) platform, one of the most popular crypto assets besides Bitcoin (BTC). Smart contract it allows DeFi to run automatically in the absence middleman or third parties. Smart contract itself is a programming language. This is the main difference between DeFi and traditional financial institutions such as banking, namely disintermediation.

Crypto ecosystem in Indonesia

Currently, crypto asset trading in Indonesia is quite large and has grown significantly in recent years. Several players who have also obtained operating permits from CoFTRA, including TokoCrypto, Indodax, Pluang, Pintu, and several others.

Regarding regulations, Manda revealed that there are no standard DeFi rules in Indonesia, while related to the crypto industry, regulations that are regulated are only limited to trading or crypto assets as commodities. As a new instrument that intersects with industry finance, The discourse continues to be rolled out for the rules to be established soon.

Although it cannot cover all aspects involving crypto assets, this regulation is expected to be a starting point for a more focused ecosystem as well as a guide for players in this industry. In addition, BPS has also issued a special KBLI (Classification of Standard Indonesian Business Fields) regarding "Blockchain Technology Development Activities", this shows a bright projection for the future of crypto assets in Indonesia.

At the end of 2020, a special association named ASPAKRINDO (Indonesian Crypto Asset Traders Association) was formed which houses almost all crypto asset traders in Indonesia as well as the Indonesian Commodity and Derivatives Exchange (ICDX) and the Indonesia Clearing House (ICH). This non-profit organization aims to educate the public regarding crypto assets and act as a bridge for discussions with regulators.

Challenges and opportunities

In addition to transparency, DeFi also offers advantages in terms of coverage. There are many Indonesian people who still unbankable, let alone the experience of experiencing financial facilities, access to the banking system is still limited. Being without intermediaries, this crypto asset can be used by anyone who has internet access in a global network.

Utilization of these crypto assets includes: collateral or loan guarantees, of course in a registered DeFi platform. Finally, in terms of cost, DeFi is considered very effective and efficient for users borrowers or borrower.

In terms of security, DeFi was created with a capable security system and without intermediaries. This is an advantage but also a risk for its users. The reason is, any negligence will be entirely the responsibility of the individual.

Regarding education, DeFi does require a deeper understanding of centralized-based crypto, because all the ins and outs will be taken care of personally. In the adoption process, Manda also revealed that disruption does not occur drastically, everything will go through a process that will often be uncomfortable at first. As the regulations are enacted, TokoCrypto continues to carry out education and implementation on its platform.

"Currently, the majority of DeFi users are those who have already entered the world of crypto assets and understand very well about the ins and outs of this industry," he added.

In its implementation, DeFi technology was not created to replace banks as financial institutions, but as an alternative to the function of banks which are increasingly being eroded by technology. DeFi offers an effective and efficient system as a transformation between the traditional financial industry and technology.

"In the next five years, as adoption becomes more massive and more people feel the benefits, DeFi will become commonplace in society," concluded Manda.