Vincent Fabian Thomas, Jakarta – The Indonesian crypto market is unlikely to improve in 2023, with investors braced for another difficult year amid a new regulatory environment.
The global cryptocurrency market capitalization evaporated by more than 60 percent over the past year to around US$800 billion, CoinMarketCap data show. Several crypto exchanges have filed for bankruptcy, including the most notable exchange FTX.
In line with this bearish trend, the transaction value of crypto assets in Indonesia fell by more than 65 percent to around Rp 300 trillion ($19.1 billion) in 2022, from Rp 859 trillion the previous year, Commodity Futures Trading Regulatory Agency (Bappebti) data show.
Bappebti expected the value of crypto assets, especially cryptocurrencies to continue declining this year, albeit at a much slower rate, as it has already gotten close to the bottom, but the agency noted it would take quite a long time before it could make a significant rebound.
"We will continue facing extraordinary challenges in cryptocurrencies in 2023," Acting Bappebti head Didid Noordiatmoko told an audience during a briefing on Wednesday.
Cryptocurrencies had attracted massive popularity in Indonesia and many parts of the world since the pandemic began.
In Indonesia, there were more than 16.5 million cryptocurrency investors as of November last year, surpassing total investors in the capital markets, which only numbered 10 million in the same month, authorities' data show.
Bobby, secretary-general of the Association of Crypto Asset Trading Platforms (Aspakrindo), said on Wednesday that cryptocurrencies were no different from any other financial instrument that faced pressure from prolonged global uncertainties such as rising interest rates and the war in Ukraine, which led to investors avoiding riskier assets.
Bobby said newly introduced income tax and value added tax (VAT) on crypto transactions last year also exacerbated the decline in transactions, adding that the association hoped the government would readjust the rates to help the industry recover.
Stringent crypto supervision
In line with the growing popularity of cryptocurrencies in recent years, the government moved to regulate crypto assets further, especially in the newly passed omnibus Financial Sector Law last year.
The law will transfer the supervisory role of crypto assets from Bappebti to the Financial Services Authority (OJK). Bappebti viewed the transfer as necessary because the crypto market had grown significantly to the point that it had started to pose a risk to the financial system.
The transition period will be two years or sooner after the government concludes a regulation to derive rules from the new law, which is slated to be finished in less than six months.
OJK chairman Mahendra Siregar told reporters on Dec. 21, 2022 that he did not want Indonesia to only be a market for crypto trading but that crypto assets should benefit the Indonesian economy as well.
Despite the OJK having no prior experience in regulating crypto, Mahendra gave an assurance that it would prepare the necessary human resources and infrastructure to accommodate the plan.
Bappebti said that it was possible that the transfer would not simply be on paper, but also involve professionals working in the agency to help bolster the OJK's capability in supervising crypto.
The government had previously laid a plan to construct a crypto bourse to facilitate the crypto market in the country, but it has been delayed since its first completion target in 2021. Now, Bappebti aims to finish it by the end of 2023 or alternatively the OJK, as future regulator, could set it up.
The bourse would be accompanied by a clearance house and a custodian, which would help spread the risk of the crypto market from that previously borne by Bappebti alone.
Aspakrindo's Bobby said shifting the supervision of crypto to the OJK would give the industry better supervision and the industry players would work alongside regulators to ensure a smooth transition, but he hoped the move would not lead to over regulation, which could hamper the growth of the crypto industry in the country.
Christopher Tahir, cofounder of crypto trading software Cryptowatch, said on Wednesday that he expected the crypto industry would be supervised more strictly compared with previous regulation as the OJK did with other industries, but he urged the watchdog to allow room for innovation to grow.