Registration with New Bourse: A Must for Indonesian Crypto Exchanges or Face Closure

• Indonesian Government Mandates Crypto Exchanges to Register with National Bourse
• Launch of the World's First National Bourse for Crypto Assets
• Goals and Expectations of the Bourse
• Registration and Authorization Process for Crypto Exchanges
• Acquisition of Crypto Exchange License
• Crypto Taxation and the Role of CFX
• Challenges and Future Prospects

Indonesian Government Mandates Crypto Exchanges to Register with National Bourse

The Indonesian government has mandated crypto exchanges in the country to register with the newly initiated national digital asset bourse. The administration anticipates that the bourse will aid in tracking asset liquidity and recording crypto transactions for taxation purposes. According to official data from 2023, the country boasts approximately six million more registered crypto traders than stock traders.

Launch of the World's First National Bourse for Crypto Assets

Indonesia launched the world's maiden national bourse for digital assets this year. The country now expects all crypto exchanges to enlist with the platform to ensure continued operations. The bourse, named the Commodity Future Exchange (CFX), is purposed to function akin to traditional stock exchanges like NASDAQ but with a distinct focus on digital assets. The establishment of CFX is a response from the Indonesian government to the soaring local demand for crypto assets. The country has more than 18 million registered crypto traders compared to nearly 12 million stock traders.

Goals and Expectations of the Bourse

While the primary objective of the bourse is to secure the crypto ecosystem for investors, the government also anticipates it to assist in tracking digital asset transactions for tax purposes.

Registration and Authorization Process for Crypto Exchanges

Regulations introduced by the Indonesian Commodity Futures Trading Supervisory Agency (Bappebti) in 2019 require all crypto exchanges in the country to seek authorization. Crypto exchanges operating legally in Indonesia since 2014 fall under a category called prospective crypto exchanges, as the authorization scheme was introduced later. Companies need to undergo strict evaluations to attain acknowledgment as reputable enterprises connected to CFX.

Acquisition of Crypto Exchange License

The process of authorization entails registration with self-regulatory organizations (SRO) like CFX and subsequent evaluation by Bappebti to assess the company's suitability to operate. A crypto exchange license, referred to as a PFAK, is granted only if all requirements are met, as informed by Robby Bun, the chairman of Aspakrindo, the national crypto asset trade association, which acts as a go-between for prospective crypto exchanges and regulators.

Without completing the new procedures and registrations, these prospective crypto exchanges cannot operate in Indonesia. These exchanges have a deadline of August 17, 2024, to register and obtain the necessary licenses to continue operations. There are currently 29 prospective crypto exchanges in the country that will need authorization, according to Subani, chairman of CFX.

Crypto Taxation and the Role of CFX

Registering with the CFX essentially allows the government to monitor crypto transactions for tax purposes. This registration might be accompanied by custodian services for asset storage and liquidity monitoring, as well as a clearinghouse for tax-compliant transaction recording, as per the 2019 Bappebti regulations.

Challenges and Future Prospects

However, there are still hurdles in implementing clearing and custodian services, as revealed by Robby Bun. Also, all these developments are dependent on Indonesia's current classification of crypto as commodities. A forthcoming regulatory overhaul set for 2025 will transition regulation from Bappebti to the Financial Services Authority (OJK), potentially leading to the reclassification of crypto as securities.

Although the role of the bourse following this change remains uncertain, it could be beneficial for crypto traders. At present, crypto is subject to Value Added Tax (VAT) and Income Tax (PPh). However, if reclassified as securities, these taxes could potentially decrease, creating a more favorable environment for crypto exchanges to operate.

Edited by Jonathan Stoker