Abstract
Given Indonesia’s recent legal policy developments regarding cryptocurrency, it is pertinent to ask whether this new investment market, by its overall structural formation, holds any further risks to Indonesia beyond those to individual parties. This paper contends that any effective regulation of this new ecosystem requires adoption of the machinery of more fundamental concepts and a clear direction. Even if the Government’s skepticism about soundness of the cryptocurrency markets is fully justified, how best to protect the various parties in the market is a different issue, one which calls for urgent attention from policy makers, legal practitioners, the judiciary and academic researchers. In particular, given the increasing number of startup Indonesian companies that have scrambled for seats in the new market, and the large number of related criminal cases reported in other jurisdictions, often involving hacking or embezzlement, the urgency to study best policy practices cannot be stressed enough. Against this backdrop, this paper analyzes the current legal status of virtual currency, related parties and activities in Indonesia absent direct laws and regulations to protect relevant parties.
Highlights
In 2008, the creator of the first cryptocurrency, the pseudonymous Satoshi Nakamoto, defined it as “a chain of digital signatures.1” Roughly eight years later, the Indonesian central bank (“Bank Indonesia”) named it “virtual currency,” defining it as “digital money issued by a party other than the monetary authority, obtained by way of mining, purchase or transfer of reward, and including Bitcoin, Blackoin, Dash Dogecoin, Litecoin, Nxt, Peercoin, Primecoin, Ripple, and Ven.” (Official Elucidation of each of Art. 34 Item. (a) of BI Reg. 18/69/ PBi/2016 and Article 8 of BI Reg.19/12/ PBI/2017)
Financial Technology or fintech is defined under Indonesian law as “the utilization of technology in financial systems which delivers products, services, technology, and/or a new business model and has an impact on monetary stability, financial system stability, and/or the efficiency, continuity, security, and reliability of the payment system.”21 once a certain product or business is recognized by the fintech industry, such a product or business is automatically viewed as a financial product or business
Indonesia’s official fintech categories include “other financial services” that can meet any of the following: “(i) innovation; (ii) ability to have an impact on products, services, technology, and/or on the existing financial business model; (iii) ability to provide benefits for society; (iv) ability to be widely used; and (v) other criteria mandated by Bank of Indonesia.”23That is, there is no bright-line rule to exclude virtual currency from the fintech area
Summary
In 2008, the creator of the first cryptocurrency, the pseudonymous Satoshi Nakamoto, defined it as “a chain of digital signatures.1” Roughly eight years later, the Indonesian central bank (“Bank Indonesia”) named it “virtual currency,” defining it as “digital money issued by a party other than the monetary authority, obtained by way of mining, purchase or transfer of reward, and including Bitcoin, Blackoin, Dash Dogecoin, Litecoin, Nxt, Peercoin, Primecoin, Ripple, and Ven.” (Official Elucidation of each of Art. 34 Item. (a) of BI Reg. 18/69/ PBi/2016 and Article 8 of BI Reg.19/12/ PBI/2017). Notwithstanding its definition as digital “money,” it is not legally recognized as a valid payment instrument in Indonesia (Article 8 of BI Reg.19/12/PBI/2017) Nor is it recognized as a legal currency, at all, despite being termed virtual “currency,” because the Rupiah is the only national currency in Indonesia (BI Reg. No.7/2011). The biggest problem underlying the virtual currency ecosystem in Indonesia is not the misleading definition, but the lack of a clear direction in national policy regarding how to regulate the cryptocurrency market and legally protect the variable parties. Given the increasing number of startup companies that have scrambled for seats in the new market and the large number of related criminal cases reported in other countries (e.g. hacking, embezzlement, etc.), the urgency of this pursuit cannot be stressed enough Against this backdrop, this study first assesses what virtual currency “is” under the laws and regulations of Indonesia. That serves as a basis for the value; and (v) there is a lack of consumer protection. 5 See Adinda Normala, “OJK Warns of New Cryptocurrency-Based Investment”, Jakarta Globe, 26 January 2018. 6 The official full name is “Satuan Tugas Penanganan Dugaan Tindakan Melawan Hyukum Di Bidang
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