Indonesian regulator issues moratorium on new crypto exchange licenses

Indonesian regulator issues moratorium on new crypto exchange licenses

(October 7, 2022) As of August 15, 2022, there is a moratorium on issuing new crypto exchange licenses in Indonesia. The moratorium was introduced by the Commodity Futures Trading Regulatory Agency (Badan Pengawas Perdagangan Berjangka Komoditi Where “Bappebti”), which falls under the Ministry of Commerce and is the regulatory authority for crypto-currencies and crypto-assets, through Circular No. 208/BAPPEBTI/SE/08/2022 regarding the suspension of the issuance of registration licenses to applicants for physical traders of crypto-assets (“circular letter“).

The circular provides that Bappebti will no longer accept applications for registration from physical traders of Crypto Asset candidates (Calon Pedagang Fisik Asset Crypto) or issuing licenses to future physical traders of crypto assets (or future crypto exchanges) in Indonesia. The circular did not specify when the moratorium should be lifted.

Crypto asset trader activity

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Bappebti Ordinance No. 8 of 2021 dated October 29, 2021 regarding the guidelines for organizing a physical exchange market for crypto-assets on the futures exchange (“Bappebti Reg. 8/2021“)” requires a company to obtain a Crypto Asset Physical Trader License in the form of a Crypto Asset Physical Trader Approval from Bappebti in order to engage in business as a Crypto Asset Physical Trader (also known as a crypto exchange). The licensing process under the regulations includes meeting capitalization, labor, technical and futures exchange membership requirements (Bursa Berdzhanka) and the Futures Clearing Agency (Lembaga Kliring Berjangka).

However, as the futures exchange infrastructure and futures clearing agency are yet to be established, in their absence the Bappebti Reg. 8/2021 requires both existing and new Physical crypto asset dealer companies are the first to apply for registration for a physical crypto asset dealer applicant license. Successful registration allows companies to do business before obtaining a physical trader license for crypto assets.

Once the futures exchange and futures clearing agency are established, new physical traders of crypto assets can directly apply for a physical trader license without having to register as an applicant first. Companies that have already received a Crypto Asset Physical Trader Applicant License must re-apply to the Bappebti Head to become a Crypto Asset Physical Trader. This new application process should be initiated not later than one month from the establishment of the futures exchange and futures clearing agency, in accordance with the mandate of Bappebti Reg. 8/2021

What should I expect?

Since the introduction of the moratorium, there has been speculation that Bappebti is drafting new regulations for physical crypto asset traders and applicants, which may be released by the end of 2022 and may amend the Bappebti Reg. 8/2021 (“Draft regulation“).

On September 20, 2022, the Deputy Minister of Trade and the Acting Head of Bappebti participated in a working meeting with Commission VI of the Council of People’s Representative (“CMA“). Commission VI is the DPR’s Commission on Industry, Investment and Trade Competition. During the workshop, DPR received an explanation from the Deputy Minister of Trade on the measures taken by Bappebti to strengthen the regulation of digital trading of crypto assets, investor/customer protection in crypto asset exchanges, advisory agreements and crypto exchanges themselves.

Bapebti relayed his various plans going forward, including the following:

  • Bappebti plans to provide ratings for physical cryptocurrency traders/exchanges in Indonesia that the public can refer to before making a transaction.
  • Physical crypto-asset traders will need to obtain ISO 27001 certification for information management security standards.
  • At least two-thirds of the members of the Board of Directors and the Board of Commissioners of Crypto Asset Physical Traders must be Indonesian citizens and domiciled in Indonesia.
  • In order to secure client funds, Bappebti may require crypto assets to be 100% held by third parties or forward clearing institutions. We understand that third party here means the Crypto Asset Custodians or the Futures Clearing Agency.
  • Bappebti intends to increase the minimum capital requirement for physical crypto-asset traders from IDR 50 billion to IDR 100 billion, considering business scale and net assets. However, it is unclear whether this change will apply to both physical cryptoasset traders and applicants.
  • Traders of physical cryptoassets may be required to perform a minimum number of monthly transactions, with penalties for failure to meet the minimum.

Please note that all of the above points are subject to change or removal pending the publication of new rules.

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