06 Sep 2022
Indonesian Regulator Publishes Updated Whitelist of Officially Approved Crypto Assets

1. Introduction

Following the issuance in 2020 of their first ever list of crypto assets that are officially approved for trading on the local crypto-assets market (“Whitelist”),[1] the Commodity Futures Trading Supervisory Authority (“Bappebti”) has now issued a much-anticipated update of the Whitelist, which expands the number of officially approved crypto assets from 229 to 383.

The revised Whitelist is incorporated in Bappebti Regulation No. 11 of 2022 on the List of Tradable Crypto Assets on the Crypto-Asset Physical Market (“Reg. 11”).[2]

Besides updating and expanding the Whitelist, Reg. 11 also sets out rules for adding or removing crypto assets to/from the Whitelist, the listing and delisting of crypto assets by crypto asset trading platforms/exchanges, and updated comprehensive guidelines for identifying crypto assets for inclusion on the Whitelist.

For more background information on Indonesia’s crypto trading regulatory regime, see our ABNR updates published on 18 February 2019 (click here) and 23 December 2021 (click here).

Note on terminology: the term “crypto asset physical trader” (“Crypto Asset Trader”) is employed in this update in its Indonesian law sense, i.e., it refers to a typical cryptocurrency platform / exchange rather than an individual investor that engages in the trading of crypto assets.

2. Caveat

Before discussing the changes introduced by Reg. 11, a number of caveats are in order.

Firstly, it is important to note that although the products on the Whitelist have been vetted by Bappebti, their inclusion on the list does not provide any kind of assurance as to their future prospects. As with all investments, it is very much a case of caveat emptor – let the buyer beware (or investor in this case), as clearly highlighted by the crashes of LUNA and UST in May of this year.

Secondly, while Reg. 11 provides sanctions for Crypto Asset Traders that offer crypto assets that are not on the Whitelist, there seems to be a significant loophole. This is because Reg. 11 initially states that only approved crypto assets on the Whitelist may be offered for trading, but then goes on to say that pending an asset’s inclusion on the Whitelist, it may be offered for trading provided it satisfies the list of criteria that are set out in Reg. 11’s Appendix 1. Consequently, not all of the crypto assets listed for trading by a particular Crypto Asset Trader may actually be on the current version of the Whitelist.

3. New Whitelist

Reg. 11 now identifies 383 crypto assets that Crypto Asset Traders may offer for trading on their platforms. The fact that such a small number of coins and tokens are recognized (compared to the many thousands in circulation internationally) clearly demonstrates that Bappebti has decided to continue to apply a conservative and rather wary approach to regulation of the crypto asset industry, presumably in the expectation that this will help boost investor protection. Of course, the downside of this is that investors may decide to invest through overseas-based exchanges that are not regulated by Bappebti.

Notable new entries that are popular with Indonesian retail investors include Luna Coin (LUNA), SushiSwap (SUSHI), PancakeSwap (CAKE), AAVE, Internet Computer (ICP), Axie Infinity (AXS), Ethereum Name Service (ENS), TROY, Reef, 1INCH, DYDX, THORchain (RUNE), The Graph (GRT), Apecoin (APE), Anchor Protocol (ANC), and Secret (SCRT).

There are also a number of locally issued coins or tokens on the Whitelist, such as Kunci Coin (KUNCI), Toko Token (TKO), and Ana Coin (ANA).

4. Whitelist Revision Process

Under Reg. 11, a Crypto Asset Trader may submit a proposal to add or remove a crypto asset to/from the Whitelist to Bappebti via the proposed crypto assets futures exchange that is to be established by Bappebti.[3] The removal proposal is then subject to a joint assessment by the futures exchange and a crypto-assets committee that is also to be subsequently established by Bappebti. The futures exchange and crypto assets committee then make a recommendation based on their assessment of the asset. The proposed crypto-assets committee will consist of representatives of Bappebti, the futures exchange, clearing agency, industry association and other stakeholders (such as academics, industry participants, etc.)

The futures exchange and crypto-assets committee are also given the important role of jointly evaluating crypto assets at least once a year and submitting their findings to Bappebti.

Until such time as the futures exchange and crypto assets committee have been established, the annual evaluation of crypto assets will be undertaken by a crypto-assets assessment team made up of members drawn from (i) Bappebti, (ii) self-regulatory organizations/crypto assets associations and (iii) businesses operating in the crypto-asset market that are registered with Bappebti.

5. Listing and Delisting of Crypto Assets by Crypto Asset Traders

Listing here refers to the process by which a Crypto Asset Trader offers a new asset to the public for trading on its platform, while delisting is where a Crypto Asset Trader removes an asset from its platform.

A Crypto Asset Trader that intends to offer a crypto asset that is already on the Whitelist must notify Bappebti no later than 7 days before the launch date. Further, if a crypto asset on the Whitelist is to be dropped from a Crypto Asset Trader’s platform, they must notify Bappebti at least 10 days before delisting, and at a minimum must provide information on (i) the reasons for delisting and/or the relevant mitigation plan, (ii) the total number of customers and the amount of the relevant crypto assets that are owned by these customers, and (iii) the total value of the relevant crypto assets at the delisting date.

As regards the deletion of a crypto asset from the Whitelist, Crypto Asset Traders are obliged to discontinue offering the asset on their platforms within 30 days of issuance of the revised Whitelist. After the 30-day period has elapsed, the Crypto Asset Trader is prohibited from offering transactions involving that crypto asset.

During the 30-day period, the Crypto Asset Trader must settle with their customers, which includes allowing them to liquidate their assets or transfer them to a designated personal wallet. The procedure to be employed must be notified to customers and stated in the Crypto Asset Trader’s terms and conditions. Traders are also responsible for storing delisted crypto assets until they are withdrawn by customers.

6. Guidelines for Inclusion of Crypto Asset on Whitelist

As with its antecedent regulation, Reg. 11 provides a set of guidelines for assessing whether a crypto asset should be included on the Whitelist. These require the Crypto Asset Trader to:

• formulate standard operating procedures to monitor and assess the crypto asset;
• actively monitor and assess the trading of the crypto asset on their platform;
• actively submit the results of monitoring, and of assessments of particular developments affecting the crypto asset (especially adverse developments involving the asset), to Bappebti, the futures exchange and the crypto assets committee; and
• independently impose restrictions in the event that the crypto asset does not meet standard risk criteria based on a risk evaluation conducted by the Crypto Asset Trader.

In addition, a number of general principles must be heeded during the technical evaluation of all crypto assets for inclusion on the Whitelist:

• provision of sufficient leeway for further development of blockchain technology in Indonesia;
• legitimization of businesses that conduct business honestly and professionally;
• preventing the misuse of crypto assets for illegal activities (money laundering, terrorist financing, drugs and weapons of mass destruction); and
• anticipation of adverse eventualities impacting on the general public, and other consequences that arise from the growth and development of blockchain technology.

Further detailed criteria and sub-criteria for determining whether a crypto asset can be included on the Whitelist are set out in Appendix I to Reg. 11.

7. ABNR Commentary

The issuance of Reg. 11 and the updating of the Whitelist are to be welcomed, not least as they demonstrate a level of responsiveness on the part of the Regulator in the face of the ongoing crypto asset and blockchain boom in Indonesia - the number of local investors has reportedly increased to 15 million from only 4 million in 2020, while the volume of trades surged by 1,222% to Rp 859 trillion (approx. USD 60 billion) in 2021 from Rp 64.9 trillion in 2020, according to Ministry of Trade data.

Apart from the increase in the number of domestic investors and transactions, Indonesian players have also been eagerly launching locally issued coins and tokens, some of which have been endorsed – if not actually driven – by celebrities, thus making them hot topics in the press and across social media, especially as they are not on the Whitelist. In order to get these assets onto the Whitelist, the issuers need to comply with the guidelines set out in Reg. 11, thus going at least some way towards reassuring investors as to their bona fides. Indeed, a number of local issuers have already satisfied the requirements and secured positions on the Whitelist.

But Whitelist or no Whitelist, crypto assets continue to be high risk investments. Whilst the listing of an asset on the Whitelist may give some comfort that the regulatory requirements have been complied with, it says nothing about the prospects of the asset in question. Consequently, as we mentioned in section 2 above, it’s very much a case of caveat emptor, meaning that the investor always needs to carefully conduct their own due diligence of a crypto asset and its tokenomics in order to help reduce their exposure to potentially huge, unprotected and irrecoverable financial losses.

By partner Ms. Elsie Hakim (ehakim@abnrlaw.com) and senior associate Ms. Meitiara Bakrie (dbakrie@abnrlaw.com).

This ABNRNewsand its contents are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained in this legal update. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.