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Conventus Law: Trade in crypto assets is surging in Indonesia, with total 2021 transaction value reaching over 10 times the levels seen in 2020 according to some media citing trade ministry data. Why are those trades supervised by the Indonesia trade ministry and the Commodity Futures Trading Regulatory Agency (BAPPEBTI) and not by Indonesia’s Financial Services Authority (OJK) ?

Freddy Karyadi: This is because the crypto assets is considered as a commodity to be traded in future exchange. Therefore, it is under the authority of BAPPEBTI instead of OJK. 

CL: OJK announced that it had “strictly prohibited financial service institutions from using, marketing, and/or facilitating crypto asset trading,”. It is understood that the ministry is also currently facilitating the set up of a separate bourse for digital assets, called the Digital Futures Exchange. The Commodity Futures Trading Regulatory Agency (BAPPEBTI) has issued a list of legal cryptocurrency assets approved for trading in Indonesia. Is this all pointing towards crypto currencies soon being legally used for payments in the country?

FK: The BAPPEBTI issued the list of legal cryptocurrency assets approved for trading as it is one of the requirements for the crypto assets to be legally traded in Indonesian market. We are not sure on the impact of the permission to use the crypto assets as a legal payment in Indonesia. However, we believe it is still long way to go until we can reach that part. 

CL: Indonesia’s top Islamic scholarly body, the National Ulema Council, has ruled that cryptocurrencies are haram (forbidden) as they failed to meet standard of Islamic financial law. What does this mean for the future of cryptocurrencies in Indonesia?

FK: As Indonesia’s major population is Muslim, the ruling of the MUI may play a major part in the development of cryptocurrency in Indonesia. Some Muslims may follow the rule of the MUI and refuse to make any investment in crypto assets – leading to unpopularity of cryptocurrency in Indonesian market. However, there may be some swing Muslim investors who do not follow the MUI rulings if they refer to other Muslim country such as UAE and Bahrain who have backed crypto assets in their country. 

CL: There is no regulation in Indonesia that specifically deals with cryptocurrency.  However,  licensed crypto-asset exchanges are allowed to use or market cryptocurrency and can facilitate asset trading in Indonesia. As cryptocurrency and the number of users continue to grow, regulation will be a priority. What regulations are you expecting to see in the near future?

FK: The BAPPEBTI recently issued an update on crypto-asset through the issuance of BAPPEBTI Regulation No. 8 of 2021 on Guidance of Operation of Physical Market of Crypto-Asset in Future Exchange. This regulation regulates among others licensing requirements, rights, obligations, and duties of the key players involved in the crypto-asset physical market, such as Futures Exchange, Crypto-Asset Trader, Futures Clearing Institution, and Manager of Crypto-Asset Storage. As the cryptocurrency is a new “thing” under Indonesian laws and regulations, the government will keep an eye on the development of the cryptocurrency business model.

They will keep updating the regulation so that it can protect the interest of the Indonesian customers. 

WRITTEN BY

For further information, please contact:

Freddy Karyadi,
fkaryadi@abnrlaw.com

Freddy Karyadi has over two decades of practising law in Indonesia and has been heavily involved in numerous complex cross border deals including TMT, TAX, restructuring distressed assets, M&A, investment, employment and dispute settlement/bankruptcy.

Karyadi was one of the pioneers who focused on the DIGITAL INDUSTRY and is the head of fintech practice team. Freddy led ABNR team in handling many transactions involving technology and fin-tech / health-tech / edu-tech/Media/ TMT companies, from early stage fund raising, integration, incorporation-expansion, exit, public offering preparation to regulatory compliance and has represented independent power producers (IPP), giant ECAs and commercial banks for various electricity sector financing. Karyadi’s clients vary from multinational to start-ups which span across a wide range of industries including natural resources, energy, financial institutions (including MULTIFINANCE, P2P, insurance, insurance brokerage, bank, etc), health-care, private equity funds – venture capital, and property. With a strong knowledge of legal, commercial, TAX and accounting issues that these industries encounter, Karyadi can quickly identify the key issues and offer practical business oriented legal solutions.

On litigation matters, Karyadi handled various suspensions of payment and bankruptcy proceeding of various industries including aviation, shipping, and mining sectors and also assisted clients in TAX disputes.

Karyadi has been consistently rated as a leading lawyer by several international publications including Legal500, Asian Business Law Journal (Vantage Asia), IFLR 1000 and Asialaw for the last half decade.

He is a member of the Board of Ethic of AFTECH (Indonesian FINTECH Association) and the Editorial Board of The Derivatives and Financial Instrument Journal of the International Bureau of Fiscal Documentations. He contributes numerous TAX and law articles of Conventus Law, IFLR, International Tax Review, Thomson Reuters, Lexology, International Comparative Legal Guide and Getting the Deal Through. Karyadi was also a speaker at IBA, IPBA, IFA and IFLR events and gave seminars for tech start-up communities.