There’s a reason for making Indonesia our first stop. Well, there are a few reasons. But let’s start by understanding this country a little bit.
With more than 17,000 islands spread between the Indian and the Pacific Ocean, Indonesia is the world’s largest island country. It has a population of more than 267 million people, which makes it the 4th most populous country in the world.
This country has the largest economy in Southeast Asia, with the 2019 World Bank GDP data putting it as the world’s 16th largest economy, valued at US$1.11 trillion.
Cryptocurrencies: Fears & Concerns
When it comes to cryptocurrency, some common fears and concerns of government in many countries, as mentioned in my introduction to this series (you can read that here), are echoed in the following Press Release issued by The Central Bank of Indonesia on 18 January 2018 titled ‘Bank Indonesia Warns All Parties Not to Sell, Buy, or Trade Virtual Currency’.
You can read the Press Statement here. In summary, here are the main points from this press release:
- Virtual currencies are not recognized as legitimate instrument of payment
- Ownership of virtual currency is highly risky
- It’s not based on any assets
- Vulnerable to bubble risks
- Susceptible to misuse for money laundering
- Forbids all payment system operator to process virtual currency transactions
A Balanced approach
Despite the need to control and regulate cryptocurrency trading, the government of Indonesia is looking for a balance between regulating the industry and protecting the growing cryptocurrency trading community. As a result, earlier this year, Bappebti (Indonesian Commodities and Futures Trading Regulatory Authority), has given approval for Zipmex to operate in Indonesia. As of February 2020, in order to be allowed to legally offer trading services, all cryptocurrency exchanges operating in Indonesia are required to register with Bappebti. Application success depends on whether the trading platform is in compliance with requirements set by Bappebti.
A further indication that Indonesia has potential for growth in the adoption of cryptocurrency is the fact that Binance, the largest cryptocurrency exchange in the world, has invested in Tokocrypto, a regulated cryptocurrency exchange in Indonesia.
Changpeng Zhao, Founder and CEO of Binance, has this to say:
... with fast technology adoption, strong economic growth, and the world’s fourth-largest population, Indonesia will become one of the leading centers of the blockchain ecosystem in Southeast Asia. Our investment in Tokocrypto will allow us to explore exciting new opportunities together for the Indonesian market with a regulated local partner to further enable the freedom of money.
This is not a surprising move as a January 2020 report by Hootsuite (citing data from GlobalWebIndex) showed that 11% of Indonesians own cryptocurrency. That’s 1 in 9 persons.
Quite an impressive figure considering there are 175.4 million internet users in Indonesia, making it a penetration rate of only 64%.
(Image Source: Hootsuite)
The same report showed that Indonesia has the highest ecommerce adoption rate. 89% of internet users aged between 16 and 64 said they bought something online via any device in the past month.
(Image Source: Hootsuite)
The Hunger Factor
Let’s look at one other factor. This is what I call the ‘hunger factor’. How willing is a person to not only adopt but promote a new product or service.
A social experiment was conducted by Onfo in four countries. Two were developed countries - the U.S. and Germany and two developing countries - Russia and Indonesia. It was a simple experiment. One hundred participants were each given ten free crypto coins. Additionally, more coins will be given to those who were successful in attracting others to the cryptocurrency.
The experiment discovered that the spread in developing countries was significantly faster at up to 4 times faster than the developed countries. The following are the results for each country:
- U.S. - 100 people attracted 1,112 new users
- Germany - 100 people attracted 763 new users
- Russia - 100 people attracted 2,304 new users
- Indonesia - 100 people attracted 4,350 new users
(Image Source: news.bitcoin.com)
The report further notes that,
the absence of a national credit lending system, coupled with the increasing smartphone penetration and the consequences of the coronavirus pandemic, are also making Indonesia a ripe market for cryptocurrency disruption.
Given the above scenarios in Indonesia, how the cryptocurrency momentum pans out is yet to be seen. As can be seen, the potential for mass consumption is a clear possibility with the Indonesian government managing a balance in the adoption.
Anything can happen and time will tell. I’ll occasionally do some update on the development in the countries in this series.
Do share your thoughts.
This article is part of the “Crypto around the World” series I’m writing about. Indonesia is the first stop. Please like and follow me if you want to take this journey with me.
Pixabay.com Images from: Michael Gaida | Public Domain Pictures
One of my reasons for starting to write is to learn. I’m open to constructive feedback and ideas on how to improve my writing. Feel free to drop me a comment. Of course, the tip is a motivating factor to write more.
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