Crypto Regulation in Indonesia: Protection of Investors

Controversial, abstract, unstable/volatile, these are probably the impression most people get when the term cryptocurrency or crypto pops up. Nevertheless, it does seem that the crypto fever is not going to stop any time soon. In Indonesia alone, despite being banned as legal tender, increasing trend (in terms of number of investors) has been shown by growth of investors from 2.5 million in 2020 to a staggering 6.5 million in 2021. As per March 2021, the Indonesia's crypto trading volume has reached up to IDR 127 Trillion.
 

Indonesian Regulatory Framework on Crypto 
When speaking of legal construct, the Indonesian regulator classified crypto only as movable and intangible asset. Particularly, crypto is classified as intangible Commodity, which consequently bring crypto under the jusrisdiction of Commodities Exchange Authority ("Bappebti") - none of the Bappebti regulations, however, are designed to regulate Initial Coin Offering. For comparison, the US authorities have approached crypto in multifaceted manner as it can be seen as securities, commodities as well as object under the law overseeing the activity of financial institutions and payments transmitters (Bank Secrecy Act).

Law No. 10 of 2011 on Commodities Exchange Trading	Law  No. 7 of 2011 on Currency	Law No. 8 of 1995 on Capital Market
Article 1.2: Commodity is defined as goods, service, right and any other interests and every derivative of commodity which can be traded and become subject of commodities future, sharia derivative contract, and/or any other derivative contracts.	Under this Law, Indonesian Rupiah is stated to be the only valid payment instrument in Indonesia. Note: Under this Law, crypto is not allowed to be treated as legal tender.	Under this Law, Stock is defined as security, which consists of acknowledgment of indebtedness, commercial paper, shares, bonds, IOU, participation unit in collective investment contract, futures contract deriving from Stock, and every derivative of Stock. Note: This Law makes it clear that crypto is not a security instrument.

It was not until 2018 that the formal legal framework on crypto introduced to the public. Having 'endorsed' by the Coordinating Minister on Economy, Bappebti consistently issued imlementing regulations/decrees in an attempt to create more certain atmosphere for stakeholders. In designing the decrees, legal certainty, protection for investors, anti money laundering and anti terrorism are among the major considerations. To date, Bappebti has issued at least five decrees, most of these decrees regulate the conduct of trader and depository service provider at great length.  

Investors Protection 
Protection for investors within the context of the Indonesian crypto regulations are shown by the following requirements: 

Approval and Registration
Approval from Bappebti is required before a trader, depository service provider and/or clearing agent may engage in crypto trading business. Particularly for trader, Bappebti publishes a list of names of trader who are registered with it (accessible) in Bappebti's website: http://bappebti.go.id/aktualita/detail/7016) - the list is subject to review.  

Wallets Disclosure
Trader is obliged to report and disclose address and location of wallets used.

KYC on Customer/Investor
Prior to engaging a customer, it is mandatory for a trader to conduct KYC and Customer Due Diligence. Risk disclosure must also be in place prior to trading. 

Periodical Reporting
A trader must submit the following reports to Bappebti: (i) Daily Tranaction Report (daily and monthly); (ii) Financial Report (daily, monthly and annualy); (iii) Annual Activities Report. 

Crypto White List

Currently, the list of tradable crypto assets in Indonesian commodities exchange market is published in Bappebti Regulation No. 7 of 2020. To make it to the list, a crypto asset must, among other things, be in the top 500 of coin to determine worthiness of a crypto asset. 

Other than the above, there are many other requirements that must be met by trader, depository service provider or clearance institution before they are allowed to engage in business surrounding the crypto trading. Those requirements range from capital size, IT infrastuctures worthiness and certification, SOP compliance, fit and proper test for the board of management to trading mechanism. It is also worth noting that a depository service provider must engage with insurance provider to cover each and every coins stored in its system.  
 
Author: Valery Sarumpaet 
Email: valery.sarumpaet@arkanantalaw.co.id 
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