Indonesia Wants Crypto Exchanges to Stop Reinvesting User Funds

Indonesia is mulling new rules on crypto exchanges to stamp out foreign ownership and stop reinvestment of user funds

article-image

Indonesia’s capital, Jakarta | Source: Shutterstock

share

key takeaways

  • Indonesia’s trade ministry wants two-thirds of crypto exchange board members and directors to be citizens residing within the country
  • Client funds will also need to be custodied by a third party while exchanges will be barred from reinvesting those stored assets

Indonesia will seek to clamp down on foreign ownership of crypto exchanges by introducing a new rule which mandates 66% of company board members and directors be citizens living within the country.

The ministry’s Commodity Futures Trading Regulatory Agency (Bappetbi) is expected to roll out the new ruling soon, Reuters reported Tuesday citing deputy trade minister Jerry Sambuaga.

Sambuaga told reporters after a parliamentary hearing that the ministry did not wish to carelessly dole out permits to exchanges. Instead, it would issue them to platforms that the ministry considers credible after meeting the necessary requirements.

Blockworks reached out to the ministry to better understand the timeframe for the ruling, as well as the requirements for exchanges, but a spokesperson wasn’t immediately available.

The agency will also mandate exchanges use a third party for the custody of client funds while prohibiting the marketplaces from reinvesting the stored assets, per the report, the latter resembling the primary activity of now-bankrupt crypto lenders Celsius and Voyager.

All this marks another step in Indonesia’s journey to regulating digital assets. Last year, the country cracked down on unlicensed crypto merchants and payment processors deemed to be operating outside the agency’s purview.

The archipelago nation, which consists of 17,000 separate islands, is one of the largest adopters of cryptocurrencies in the world, with transaction activity having exceeded twice the global average in April, according to YouGov.

Indonesia recognized crypto as a commodity and formalized trading of the asset class in 2018, including via centralized exchanges. Though under recent regulatory frameworks in 2019 and 2020, only 229 cryptoassets are legally sanctioned for trading by licensed entities in compliance with Bappetbi. 

It comes as the industry bore the brunt of several major project collapses including Do Kwon’s Terra ecosystem and Marcus Lim’s Zipmex exchange — which has a foothold in the country and is fighting to stay afloat through investment from outside parties. 

Kwon, whose ecosystem’s asset LUNA was legally sanctioned for trading in Indonesia via Zipmex, has a warrant out for his arrest in South Korea, with his current whereabouts unknown.

Didid Noordiatmoko, the agency’s acting head, told the parliamentary hearing on Tuesday its new ruling could prevent an exchange’s C-suite from bolting from the country when a problem crops up.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

The settlement ends the legal battle over eth.link, a domain once owned by imprisoned developer Virgil Griffith

article-image

TBC President Lee Bratcher told Blockworks he’s “confident” about the Council’s case against the DOE

article-image

The Monday trading volumes total passes the previous high mark set on the fund’s first day of trading nearly seven weeks ago

article-image

The hearings are expected to last for a couple of days as the court hears arguments for and against the bankruptcy plan proposed by Genesis

article-image

Equities were mixed toward the end of Monday’s session while cryptocurrencies continued their rally

article-image

Though the opposing flow trend is likely to slow over time, industry watchers note, bitcoin fund assets could one day eclipse the $90 billion gold ETF space