Indonesia had started experimenting with blockchain for purposes other than cryptocurrency in 2018 and today it is a maturing sector
Indonesia had prohibited the use of crypto-assets in any form for purposes of payments; however, these are legally designated as an asset and not a currency. The Indonesian government has also made efforts to create a regulatory framework to legalize several digital asset exchanges in the country. However, blockchain technology as a whole and the concept of ‘smart contracts’ have gained currency in the country and these are often discussed in relation to regulations for fintechs. There is Indonesia Blockchain Association, which is representing entrepreneurs in this realm while talking with the government and regulatory authorities. Locally set up fintech companies are allowed to use and implement blockchain technology, and blockchain solutions are treated as a part of the ongoing drive in fintech innovation.
Several Indonesian companies are researching how to best deploy the blockchain and DLT technologies so that the general public can derive benefits. Since there are very few enterprises in the country that have the resources to carry out research and do pilots, industry watchers feel it is still far for the country to have the infrastructure to make use of the technology in any meaningful manner. But the day is not far away when opportunities will come up and blockchain technology will assume the role of the back end of the next-generation technology enterprises.
There are institutions that have experimented with the technology and successfully implemented applications that have proved to be beneficial to the industry concerned and the customers. Bank Central Asia, which is Indonesia’s largest bank, has hosted local hackathons to encourage the development of blockchain technology for fintech companies.
BANKS NOW EXPERIMENTING
Way back in January 2018, Bank Indonesia had announced plans to launch its own digital currency backed by blockchain technology. The central bank’s bold decision had then motivated banks in the country to explore possibilities with blockchain and at least 5 banks – Bank Negara Indonesia, Bank Rakyat Indonesia, Bank Mandiri, Bank Danamon, and Bank Permata – are in different stages of evaluating how best the technology can be adopted in their operations. These banks see benefits of the technology in managing inward remittances – Indonesia is ranked 14th in the world for receipts of migrant remittances according to the World Bank, with an estimated US$10.5 billion sent home from those working abroad – as they feel using the technology can actually increase the quantum of remittances manifold as blockchain removes the need for an intermediary party, thus allowing for the efficient and free transfer of funds.
Blockchain is also being looked upon as a technology that can be successfully and beneficially implemented in sectors other than finance. For example, the Indonesian government’s Creative Economy Agency has plans to use the technology to protect artists’ copyrights by helping musicians who have loaded their work to the database to track and monitor downloads and usage online and calculate royalties due. Horizon State, a blockchain company that focuses on secure community empowerment, has created a platform that allows for tamper-proof voting systems. Similarly, Blockchain Zoo, a Bali-based company, is a leader in blockchain consultancy services offering advice and practical help in projects from ideation to implementation.
When interest in blockchain began in 2018, there were only 6 companies registered with the government handling blockchain-related work. Now there are 66 blockchain companies, including consultancies, training institutions, development firms, and companies involved in logistics projects, big data projects, point-of-sale projects, etc. Some of the top companies involved in the development and application of the technology are:
– PundiX, which initiated one of the first Blockchain-based point-of-sale systems in the region, now operating worldwide
– Hara, which aims to create a data platform for farmers in Indonesia, in collaboration with Amazon
– Blocksphere, a Gartner-listed consulting and development company with a number of high-profile clients nationally and internationally and offering a blockchain-as-a-service platform for Indonesia’s largest telecommunications company.
– Indodax, (previously known as bitcoin.co.id), one of the earliest blockchain companies to be formed in Indonesia is now of the biggest domestic digital asset exchanges in the country with more than 1.5 million registered users as of 2019.
In Indonesia, several government agencies are actively involved in developing regulations relating to crypto-assets. These include Commodity Futures Trading Regulatory Agency (BAPPEBTI), which is the main regulator involved in the supervision of futures trading activities in Indonesia, including forex and crypto-assets trading, Indonesian Financial Transaction Reports and Analysis Center (PPATK), an independent institution established in the context of preventing and eradicating money laundering in Indonesia, and Bank Indonesia, which is the central bank of the country. These 3 government agencies regulate all blockchain players in Indonesia, including crypto-asset exchanges and local blockchain projects.