Main Points:
- Indonesia’s cryptocurrency licensing system aims to harness economic potential and protect users.
- Concerns are growing that the system may lead to monopolistic or oligopolistic market conditions.
- High capital requirements and slow approval processes are significant barriers for new and smaller exchanges.
- The current system may stifle innovation and limit competition in Indonesia’s crypto market.
Indonesia’s Licensing System and Potential Market Monopolization
Indonesia has implemented a strict cryptocurrency licensing system to unlock the economic potential of digital assets while ensuring the protection of its users. However, industry insiders have raised concerns about the impact of this system on market competition. According to Taufik Nugraha, the head of Indonesia’s Applied Digital Economy Regulation Network (IADERN) and a government advisor, the licensing process for Cryptocurrency Asset Trading Companies (PFAK) has several issues that could lead to market monopolization.
Nugraha points out that only a few companies hold these licenses, which could lead to monopolistic or oligopolistic conditions. This is particularly worrying as an oligopoly would make it difficult for new companies to enter the market, potentially allowing a small number of players to dominate.
TokoCrypto’s Dominance in the Market
On September 9, Binance’s subsidiary TokoCrypto became the third company in Indonesia to obtain a PFAK license from Bappebti, the Commodity Futures Trading Regulatory Agency. TokoCrypto’s CEO, Yudho Rawis, proudly announced the company’s achievement, but Nugraha warns that this limited number of licensed companies may restrict consumer choice and lead to higher fees.
He stated, “There is a risk that these players could dominate the market, limiting consumer options and increasing transaction fees. Such a scenario could ultimately stifle innovation and reduce Indonesia’s competitiveness in the global cryptocurrency market.”
Long Licensing Process and High Capital Requirements
Many exchanges are still waiting for approval, facing a prolonged and complex registration process that delays their entry into the market. Nugraha emphasized that this lengthy approval process limits competition, making it difficult for smaller or newer exchanges to thrive in the Indonesian market.
Additionally, Nugraha criticized the high capital requirements set by the government for obtaining a PFAK license. These financial barriers further restrict the participation of smaller, local exchanges, reducing competition and diversity in the market.
“The financial commitments required to meet these requirements limit the participation of smaller market players, reducing competition and potentially hindering the diversification of services within the sector,” Nugraha said.
Legal Uncertainty and the Impact on Market Growth
Although Indonesia has introduced a regulatory framework for cryptocurrency, there remain several areas where legal clarity is lacking. This uncertainty creates difficulties for market participants and investors alike. Nugraha highlighted the need for a more precise regulatory environment to encourage further investment and foster broader development within the sector.
“The lack of legal clarity, combined with the ongoing evolution of regulations, may discourage further investment and hinder broader market development,” he added.
Indonesia’s cryptocurrency licensing system, while designed to promote user safety and unlock economic potential, is raising concerns about market competition. The slow approval process, high capital requirements, and legal uncertainties may create monopolistic conditions, stifle innovation, and limit the growth of smaller exchanges. To avoid these risks, regulatory adjustments may be necessary to ensure a fair and competitive market environment.
