Indonesia to update government rules on crypto, implement more local control

Indonesia may see new rules for crypto asset exchanges.

The South Asian country’s trade ministry plans to issue new rules to govern crypto exchanges that will require two-thirds of its board and commissioners to be Indonesian citizens and live in Indonesia, a deputy minister said on Tuesday.

This change has come due to the financial problems faced by the cryptocurrency exchange Zipmex, as it has currently stopped users from withdrawing money.

“We don’t want to give permits (for exchanges) carelessly, so only for those who meet the requirements and are credible,” Deputy Trade Minister Jerry Sambuaga told reporters after a parliamentary hearing.

Sambuaga added that the ministry’s Commodity Futures Trading Regulatory Agency (Bappebti) will issue the new rule soon.

However, no time frame has been given.

According to a document issued by the ministry, the new rule will also require an exchange to use a third party to store client funds and prohibit exchanges from re-investing stored crypto assets.

Didid Noordiatmoko, acting head of Bappebti, told a parliamentary hearing that ensuring two-thirds of the board were Indonesians based in the country “can prevent senior management from running away when a problem hits the stock market.”

Sambuaga added that the plan to launch an Indonesian crypto-asset exchange can hopefully be completed within this year. It is already delayed from last year.

According to a report by Deal Street Asia, the proposed digital asset exchange is an attempt by the government to protect its masses as the interest of cryptocurrencies has continued to grow among the population.

The crypto exchange was originally planned to go live in 2021, but was later postponed to the first quarter of 2022. This postponement also did not speed up the launch of the exchange, as its complexity forced the government to abandon the plan so far.

Bappebti’s data shows that cryptocurrency has gained popularity in Southeast Asia’s largest economy, with a total transaction volume of cryptoassets increasing by more than 1,000% in 2021 to 859.4 trillion rupiah ($57.37 billion).

The country’s performance in terms of transaction taxes has also improved.

Since the rollout of fintech and crypto transaction taxes in May, Indonesia has collected nearly $6.8 million, according to the nation’s special adviser Yon Arsal.

The Indonesian Ministry of Finance introduced a value added tax (VAT) of 0.1% on the purchase of crypto assets on May 1 this year.

The Indonesian administration decided to tax crypto transactions based on growing popularity among local investors.

Furthermore, crypto interest on Indonesian soil has skyrocketed since the outbreak of the COVID-19 pandemic. The number of crypto owners was 11 million in 2021.

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