Crypto Asset Fever: Between Regulation and Technological Development

Over the past year, the trading price of crypto assets recorded a significant upward trend. Bitcoin, for example, is year-to-date as of 19 May 2021, still experiencing a strengthening of more than 40%. Meanwhile, over the past year, it shot up to 320%. This trend has attracted the attention of many Indonesian investors.

The high transaction of crypto assets has made many countries take steps to protect the ecosystem. Globally, Asia has played a significant role in the development of the crypto asset industry over the past decade.

In this region, each country is competing to take part as a hub for crypto and blockchain assets. Based on reports CoinGecko, there were 318 new exchanges or an increase of 706% in the last 18 months.

As many as 40% of them come from Asia.

Indonesia, as the fourth most populous country in the world, is home to most of the digital business community. Quoting from the 2019 e-Conomy report, as many as 92 million Indonesians are still in groups unbanked, followed by 42 million people joining the group underbanked. The remaining 42 million people have used financial services or banked.

This huge opportunity also poses a serious challenge for the financial industry, many financial analysts believe that unbanked users could be the next potential market in digital currencies or crypto.

In Indonesia itself, crypto assets are regulated by the Government through the Ministry of Trade and a special body has been specifically formulated under it, the Commodity Futures Trading Supervisory Agency (Bappebti). This is indicated by discharge Minister of Trade Regulation No.99 of 2018 concerning General Policy for Implementing Crypto Asset Futures Trading.

Establishment discourse crypto asset exchange Bappebti has also announced this. In a joint interview DailySocial, Head of Bappebti Indrasari Wisnu Wardhana said that this plan has reached the verification process of the required documents submitted by the Exchange to Bappebti. In this application, there are several requirements that must still be fulfilled/completed by prospective Crypto Asset Physical Market Exchange candidates.

He encouraged candidates for the Crypto Asset Physical Market Exchange to quickly fulfill the requirements so that Bappebti can issue approval as a Crypto Asset Physical Market Exchange. "The presence of the Crypto Asset Exchange is very important, but we need to prepare it well so that things don't happen that could be detrimental to society. "The Ministry of Trade, through CoFTRA, is completing the process of establishing this institution," he said.

He continued, the presence of the Futures Exchange in physical trading of crypto assets has a strategic role in supervising physical trading transactions of crypto assets and mitigating risks, especially crypto assets that can be traded on the physical crypto asset market that has been determined by Bappebti.

In Bappebti's records, until April 2021, Crypto asset customers who actively transact with crypto asset traders reached 4,8 million peoplewith a transaction value of around IDR 237,3 trillion (January-April 2021). Indrasari views that customers who make crypto investments or transactions because they see the value/price of crypto assets tend to rise from time to time.

The price movement of crypto assets, especially Bitcoin, from January 1 2021 to April 30 2021 increased by 95,82% to IDR 807,3 billion from the previous IDR 412,2 billion. "This increase is what encourages crypto asset customers to have a high interest in carrying out crypto asset transactions."

Regulations that have been published

After Minister of Trade Regulation No. 99 of 2018, Bappebti again issued derivative regulations in the form of Perba (Bappebti Regulation) No. 5 of 2019 concerning Technical Provisions for the Implementation of the Physical Market for Crypto Assets on the Futures Exchange and regulatory changes, as well CoFTRA Regulation No. 7 of 2020 concerning Determining the List of Crypto Assets that Can Be Traded on the Physical Crypto Asset Market.

In the Bappebti regulation, several institutions are stipulated that are involved in physical trading of crypto assets, namely the Futures Exchange, Futures Clearing, Depository Managers and Crypto Asset Traders.

The rapid development has made Bappebti formulate other regulations, including provisions regarding the obligation of prospective Crypto Asset Physical Traders to report to Bappebti all the identities of registered customers; report all wallets managed; every Customer acceptance process for prospective Physical Crypto Asset Traders must be carried out know your customer (KYC).

Finally, customers are given an understanding or explanation regarding the risks and implementation of Crypto Asset transactions. Another supervision carried out by Bappebti is the issuance Circular Letter of the Head of CoFTRA Number 758/BAPPEBTI/SE/12/2019 concerning Submission of Periodic and Anytime Reports in the context of monitoring the activities of physical crypto asset traders.

In order to stay in line with developments, CoFTRA has amended CoFTRA Regulation No. 5 of 2019 three times with Commodity Futures Trading Supervisory Agency Regulation No. 3 of 2020 concerning the Third Amendment to Commodity Futures Trading Supervisory Agency Regulation No. 5 of 2019 concerning Technical Provisions for the Implementation of Physical Markets Crypto Assets (Crypto Assets) on the Futures Exchange.

A summary of the technical provisions contained in this regulation is as follows:

1. The transaction mechanism that occurs in the Physical Crypto Asset Trading System on the Physical Market of the Futures Exchange, some of the Crypto Assets are stored in wallet storage (repository) and some are stored in the Crypto Asset Physical Trader's Depository, deposits of funds, both buy/sell transactions, are recorded and stored in separate accounts in the Clearing House's separate account (70%) and in the separate account of the Crypto Asset Physical Trader (30%) and reported and supervised by the Futures Exchange and CoFTRA;

2. Physical Crypto Asset Traders are required to have ISO 27001 (information Security Management System) and ISO 27017 (cloud security) and ISO 27018 (cloudprivacy) if a Physical Crypto Asset Trader uses cloud;

3. Server & Hosting which is used as a trading system must be placed within the country. The same is true for Crypto Asset Storage Managers;

4. To provide security guarantees for stored Crypto Assets, Bappebti requires storage to be carried out in the form of hot storage and coldstorage, where 50% of the total Crypto Assets managed by Physical Crypto Asset Traders must be placed with the Crypto Asset Storage Manager and who has a guarantee cooperation agreement with the Crypto Asset storage insurance party;

5. Of the 50% of Crypto Assets that are kept personally by Physical Crypto Asset Traders, at least 70% are kept privately. offline or coldstorage and a maximum of 30% is saved online or hot storage;

6. It is prohibited to trade types of Crypto Assets other than those stipulated in the Regulation concerning the list of types of Crypto Assets that can be traded on the Physical Crypto Asset Market, including the prohibition of selling Crypto Assets created by the relevant prospective Physical Crypto Asset Trader or its affiliated party;

7. Mandatory denomination in IDR currency;

8. In terms of ownership of customer funds, Bappebti regulates that Physical Crypto Asset Traders are required to place 70% of customer funds in a separate account placed at the Futures Clearing House.

Bappebti's intention towards all of these regulations is to protect the public in trading crypto assets. Reflecting on other countries, it was found that there were so many platforms that ran away with their customers' or investors' money.

New includes trading

If you look closely, all the regulations issued by Bappebti above only cover crypto trading. This means that crypto assets are stored for a certain period of time on a platform, exchanged for other products of the same type, and investors can buy or sell only through futures exchanges which are fully regulated by Bappebti.

Indonesia itself is one of the countries that recognizes crypto assets as commodities, not as currency.

In session TuesdayStartup which is held DailySocial, Tokocrypto COO TK Hermanda conveyed the rules regarding crypto derivative products, one of which is decentralized finance (DeFi) and centralized finance (CeFi) does not yet have regulations in Indonesia.

“When the verb trading This is within the purview of Bappebti, but when it comes to its domain it becomes a smelly new instrument Finance, should be in the OJK. That's my opinion. This discourse will definitely develop. OJK should open with new variants [crypto]. "So don't just get caught up in trading, outside of that there are many crypto asset derivatives that you can play with," said the man who is more familiarly called Manda.

Apart from that, Chairman of the Indonesian Blockchain Association (ABI) Oham Dunggio highlighted that currently the crypto asset business process, be it clearing, depository and exchange processes, occurs individually in each entity. According to him, this issue is quite basic and needs to be highlighted by Bappebti before going into other things, such as taxation.

“In my opinion, the crypto asset business process in just one entity is assisted by blockchain technology. For me, it is basic before touching other things, such as taxation," said Oham.

The presence of ABI and ASPAKRINDO (Indonesian Crypto Asset Traders Association) is tasked with overseeing the crypto industry so that it grows healthily. ABI is an association that focuses on blockchain technology with two main focuses, namely advocacy and education. Meanwhile, ASPAKRINDO has a vision that wants to realize the growth and development of the crypto asset industry in Indonesia.

ASPAKRINDO Secretary Robby believes that Bappebti has high concerns because it concerns consumer funds, therefore they are more careful in making rules and policies.

In fact, he believes that CoFTRA is the regulator that is best prepared to regulate Crypto Asset Trading policies. The reason is, there are quite a few exchanges abroad that do not follow the regulations in their country.

"ASPAKRINDO's role is to bridge the needs of Physical Crypto Asset Traders registered in Indonesia with Bappebti in formulating the best regulations for Indonesian consumers," said Robby.

Apart from the crypto asset buying and selling marketplace, derivative products are currently emerging, such as DeFi (decentralized finance), NFTs (Not Fungible Token), and others are present in Indonesia. tokocrypto and Pluang are two examples that offer such services to their investors. Next, there is the specific NOBI offer passive income for crypto investors through three DeFi-based products (staking, savingand strategy).

Responding to this derivative product, Indrasari said that since Bappebti Regulation Number 5 of 2019 was stipulated, people who want to make crypto asset trading transactions must be careful, need to study the characteristics of the investment instrument, and know the background/profile of the trader who trades it, whether the trader has registered with Bappebti.

To date, CoFTRA has recorded 13 Physical Crypto Asset Traders who have met the requirements to trade crypto assets. Then determine as many as 229 crypto asset coins that are suitable for trading with Physical Crypto Asset Traders. Tokocrypto is first company registered with CoFTRA since November 2019.

According to him, with optimism and well-targeted policies, it is not impossible that in the future crypto asset trading will continue to develop and have competitive diversification from other types of investment assets, including shares.

"Just looking at what is happening now, there are many types of crypto asset diversification available, starting from stable coin and other types of crypto assets based on the development of Ethereum as backbone his."

Indrasari also sees that the implementation of crypto asset trading will have many challenges. If not closely monitored, this instrument can be exploited by irresponsible parties such as marketing through MLM or Ponzi schemes which are currently rampant in crypto asset trading that has not received approval from Bappebti.

“Not to mention that crypto assets can be used as a means of money laundering and suspicious transactions for illegal acts such as terrorism. "For this reason, supervision and cooperation with relevant authorities in supervising crypto asset trading such as PPATK and the Police are needed to prevent prohibited transactions in physical trading of crypto assets," concluded Indrasari.

- *Header image: Depositphotos.com