Asni Ovier, Jakarta – Indonesia will not follow China's footsteps in banning all cryptocurrencies transactions outright but looking into ways to make them less prone to be used in illegal financial activities, a top official said late on Friday.
"We don't prohibit it, but we will tighten the regulations," Minister of Trade Muhammad Luthfi said in a text message to the Globe's sister publication BeritaSatu.com.
Today, the Southeast Asia country considers cryptocurrency coins like bitcoin, ethereum, or dogecoin as assets or commodities, allowing locals to trade them as such. Using the coins as currencies, on the other hand, is illegal.
Earlier on Friday, the Central Bank of China (PBoC) sent chills to the spine of cryptocurrencies traders worldwide. It said that all financial transactions involving cryptocurrencies in China were illegal.
"Business activities related to virtual currencies are illegal financial activities," the PBoC said. It added that violators would be investigated for crimes and held accountable under the law.
The central bank prohibited all related financial activities involving cryptocurrencies, such as crypto trading, token sales, transactions involving virtual currency derivatives, and what the Chinese government calls illegal fundraising.
That was a final step in China's increasing animosity toward cryptocurrencies. In the past few months, it had banned cryptocurrency trading and including mining activities there, which triggered mass miner exodus to the United States. However, in reality, crypto trading and mining practices are still happening there.
Bitcoin and several other cryptocurrencies' prices fell drastically following the announcement. According to Indodax, Indonesia's largest cryptocurrency exchange, bitcoin's price fell 7.4 percent to Rp 595 million a coin from Rp 643 million immediately after PBoC's announcement on Friday. The bitcoin price has since recovered to Rp 609 million on Saturday morning.
Meanwhile, cryptocurrencies trade in Indonesia has been flourishing in the past 18 months. The Futures Exchange Supervisory Board (Bappebti) showed total cryptocurrencies transactions in 13 local exchanges that the board approves to operate in Indonesia had grown 40 percent to Rp 370 trillion in the first five months this year, from Rp 65 trillion for the entire 2020.
The number of individuals involving in the crypto assets transaction has also gone up to 6.5 million in May, from 4 million at the end of last year. In comparison, the number of investors in the Indonesia Stock Exchange (IDX) was only 5.6 million at the end of June 2021.
Luno Indonesia, one of the crypto exchanges in the country, said on Wednesday that it is confident of doubling or tripling the number of investors on its platform from 700,000 people today. "The growth is breakneck today[...] Crypto is booming," Jay Jayawijayaningtiyas, Luno Indonesia's country manager, said earlier on Wednesday.