FTX Debacle Spurs Indonesia to Revamp Crypto Sector
(Bloomberg) — Indonesia is drawing on the structure of its stock market to revamp crypto trading and reduce risks exposed by the collapse of the FTX digital asset exchange.
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A key plank of the plan is a proposed state-backed crypto exchange where private platforms would execute trades, according to the Commodity Futures Trading Regulatory Agency, which currently oversees digital assets.
“The difficult part is that we cannot find a benchmark for such a crypto exchange,” the agency’s head Noordiatmoko said in an interview. “This could be the first.” Other planned state-backed bodies would handle clearing and custody to protect assets and avoid a repeat of the alleged fraud at FTX, he said.
The plan is similar to the way stock markets operate by separating trading, clearing and custody under official supervision, and comes as regulators globally tighten scrutiny of private crypto exchanges. The FTX exchange went into chaotic bankruptcy in November, leaving an $8 billion financial hole and raising concerns that too many such platforms are opaque and risky for investors.
Mid-year goals
The roughly two dozen crypto exchanges in Indonesia would have to trade on the state-mandated national exchange, acting as brokers, Noordiatmoko said. The new exchange could be established as early as mid-2023 and would be run by a private company instead of the state, he added.
The archipelago of around 270 million people ranked 20th out of 146 economies in the 2022 Global Crypto Adoption Index by Chainalysis, a specialist in tracking digital asset transactions.
But monthly trading volumes have crashed 95% to $233 million last month from a peak of $4.7 billion in May 2021, data from CryptoCompare shows.
Recently passed Indonesian legislation classifies digital assets as financial securities, and oversight of the sector will move over the next two years to the Financial Services Authority from the Commodity Futures Trading Agency.
By regulating tokens as securities and setting up a national crypto exchange, the government “recognizes their validity as financial and investment instruments in the country,” said Vincent Thong Ming Sen, content manager for Avocado DAO, a metaverse and blockchain gaming guild.
He said the shift involves tougher reporting and disclosure rules to tackle money laundering and terrorist financing risks, adding that only time will tell whether the blanket approach amounts to “overkill”.
NFT match
Indonesian officials are perceived to be open-minded about digital assets, while the United States is among the countries cracking down after last year’s $1.5 trillion market slump saw a number of crypto outfits explode.
The government’s stance was illustrated by university student Sultan Gustaf Al Ghozali’s brush with officialdom. He became a social media success after earning 1.5 billion rupiah ($98,500) selling non-fungible tokens of selfies. The tax office congratulated him and reminded him to pay the necessary taxes.
Previous deadlines for the national crypto exchange fell short, but Noordiatmoko insisted it will be set up before oversight of digital assets passes to the Financial Services Authority.
Bank Indonesia has previously indicated that a blockchain-based version of the rupiah will be the only digital legal tender in the Southeast Asian nation.
For crypto market prices: CRYP; for the best crypto news: TOP CRYPTO.
–With assistance from Suvashree Ghosh, Sidhartha Shukla and Soraya Permatasari.
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