Indonesian Regulator Issues Moratorium On New Crypto Exchange Licenses

(October 7, 2022) As of August 15, 2022, there is a moratorium in Indonesia on issuing new crypto exchange licenses. The moratorium was put in place 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 body for cryptocurrencies and cryptographic assets, through Circular Letter No. 208/BAPPEBTI/SE/08/2022 on the suspension of the issuance of registration licenses for candidate physical traders of crypto assets (“circular letter”).

The circular letter provides that Bappebti will no longer accept applications for registration from candidate Crypto Asset physical traders (Calon Pedagang Fisik Aset Crypto) or the issuance of licenses for prospective physical crypto-asset traders (or future crypto exchanges) in Indonesia. The circular letter does not indicate when the moratorium should be lifted.

Crypto Asset Trader Activity

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

However, as the infrastructure of the futures exchange and the futures clearing agency have not yet been established, in their absence, Bappebti Reg. 8/2021 requires both existing and new Crypto Asset Physical Trader companies are the first to apply for registration for a Crypto Asset Physical Trader candidate license. Successful registration allows companies to do business before obtaining the Crypto Asset Physical Trader license.

Once the futures exchange and futures clearing agency have been established, new crypto-asset physical trader companies can directly apply for the physical trader license without having to register as an applicant first. Companies that have already obtained a Crypto Asset Physical Trader candidate license must reapply to the head of Bappebti to become a Crypto Asset Physical Trader. This new application process must be initiated no later than one month from the establishment of the futures exchange and the futures clearing agency, in accordance with the mandate of Bappebti Reg. 8/2021.

What to 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 Bappebti Reg. 8/2021 (the “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 People’s Representative Council (“CMA”). Commission VI is the DPR commission for industry, investment and trade competition. During the working meeting, the DPR received an explanation from the Deputy Minister of Commerce on the measures taken by Bappebti to strengthen the regulation of digital trading of crypto assets, the protection of investors / customers on exchanges of crypto assets , consultant agreements, and the crypto exchanges themselves.

Bappebti relayed his various plans moving forward, including the following:

  • Bappebti plans to provide ratings for physical crypto-asset traders/exchanges in Indonesia that the public can refer to before making a transaction.
  • Physical traders of crypto-assets will need to obtain ISO 27001 certification for information management security standards.
  • At least two-thirds of the members of the Crypto Asset Physical Traders Board of Directors and Board of Commissioners must be Indonesian citizens and be domiciled in Indonesia.
  • To secure client funds, Bappebti may require crypto assets to be 100% stored 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 traders of crypto-assets from IDR 50 billion to IDR 100 billion, given the scale of business and net assets. However, it is unclear whether this change would apply to both physical crypto-asset traders and applicants.
  • Physical crypto-asset traders may be required to complete a minimum number of monthly transactions, with penalties for not meeting the minimum.

Note that all of the above points may change or be removed, pending publication of new rules.

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Indonesian Regulator Issues Moratorium On New Crypto Exchange Licenses

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