Indonesia Poised for Blockchain and Cryptocurrencies

As the fourth largest country with more than 250 million people, Indonesia stands out as a potential market for blockchain and cryptocurrencies. At least that is what Zac Cheah, the CEO of Pundi X, believes.

“The market value of virtual currencies here is huge,” he says to local media in October last year.

Pundi X closed its pre-sale ICO with an equivalent of US$4mil, raised from 615 investors. They commenced the full public ICO in November 2017 which closed on Jan 21, 2018, raising US$35mil. Pundi X describes itself as a cryptocurrency point-of-sale (POS) solution provider for retail stores. One of the reasons Cheah set up Pundi X in Indonesia was because of the small number of bank account owners in the archipelago.

“Blockchain may be a solution to financial liberation in Indonesia,” he adds. According to data released by the World Bank in 2014, only 36 percent of Indonesian adults own an account in a formal financial institution. This makes the country ripe market for a blockchain system that does not require someone to create a bank account.

Oscar Darmawan, the CEO of INDODAX (Indonesia Digital Asset Exchange) or previously named Bitcoin.co.id, shares the same optimism. “Bitcoin makes any transaction more transparent,” he says as quoted by beritagar.co.id.

INDODAX is the largest cryptocurrency exchange in Indonesia with 450,000 registered users. It used to have a daily transaction of up to US$10 million but according to Coingecko, that figure is now at US$7.8mil, possibly the result of competition coming from new exchanges in Indonesia.

Darmawan established the company in 2013 when Bitcoin was first introduced in Indonesia. He predicts that there will be 500,000 users by this year. 1 Bitcoin is now worth around Rp 111 million.

Indonesia has also seen some interesting bitcoin transactions — in has been reported that in 2014, a buyer from Texas bought a luxury villa in the island of Bali with 800 bitcoins.

Notably though, the Central Bank of Indonesia (BI) has banned virtual currencies as a payment system. According to the Indonesian Law no. 7/2011 on currency, the only legal form of payment in the country is Rupiah.

“The (virtual currency) is already banned by the payment system authority, it’s clear in the Law that (the acceptable currency) is Rupiah,” said Wimboh Santoso, the Indonesian Financial Services Authority (OJK) Chief Commissioner, in January 2018.

But Santoso says other non-financial institutions can trade virtual currencies such as Bitcoin without the permission from OJK, because non-financial institutions are not regulated by OJK.

OJK says they will continue to encourage innovation in financial technology. The Director of Digital Finance Innovation at OJK, Fithri Hadi, says the agency is open for a dialogue on innovation other than Bitcoin.

“Indonesia is still looking for solutions for financial inclusion, financial literacy and increased transparency,” he says, noting the potential that blockchain technology offer.

Meanwhile, industry players such as Darmawan says they will adhere to Indonesian laws. He believes that the Indonesian authority made the right move to ban cryptocurrencies as a form of legal payment in Indonesia.

“The authorities banned bitcoin as payment because they want to minimize monetary risks. But they will let the technology thrive,” he says.

Leon Dean