Muhammad Lutfi: We are Improving Crypto Asset and E-commerce Regulations

KOMPAS/CYPRIANUS ANTO SAPTOWALYONO

Trade Minister Muhammad Lutfi

Cryptocurrency trading and a fair business practices in e-commerce have become hot topics of public discussion lately. The skyrocketing value of cryptocurrencies has boosted public interest in investing in the assets. However, sufficient digital currency trading infrastructure is not yet available. Security and fairness in transactions have not been ensured.

The public has also highlighted the entry of cheap imported products through e-commerce, which has threatened the sustainability of micro, small and medium enterprises and other domestic industries.

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Efforts to cope with these two problems are in the hands of the Trade Ministry. In an exclusive interview with Kompas recently, Trade Minister Muhammad Lutfi answered a number of questions related to these two topics.

How do you see the development of crypto assets in the country? Is it an opportunity or a threat?

The transaction value of crypto assets is growing. This has encouraged the public to find an alternative investments, not only in securities portfolios, US dollars, and gold, but also in cryptocurrencies, which have become an investment option for many people. I acknowledge that the regulations on transactions and investment in cryptocurrencies in many countries, including Indonesia, are still weak. The movement of crypto exchange rates is still very volatile. However, this can be an investment alternative. In the future, a new equilibrium or equilibrium point cannot be avoided.

AFP/MARTIN BUREAU

This photograph taken on April 26, 2021 in Paris shows a physical imitation of the Bitcoin crypto currency pictured with a US one dollar bank note.

As for digital trade, in the near future, the Indonesian government, and even world financial institutions and the World Trade Organization (WTO), will regulate it so that there is a balance. Crypto will be regulated, too.

The issuance of the cryptocurrency regulation is intended to create a safe, fair and transparent trading mechanism for investors.

The Trade Ministry, in this case the Commodity Futures Trading Supervisory Agency (Bappebti), will regulate it. The issuance of the cryptocurrency regulation is intended to create a safe, fair and transparent trading mechanism for investors. We don\'t want people to be deceived, so like it or not, it has to be regulated.

How will crypto assets be regulated?

First, I will strengthen the internal human resources of the Bappebti, especially in dealing with cryptocurrencies. We will fix this problem in stages. It is also possible to adopt and introduce a regulatory sandbox or a trial program and business model for crypto traders within a certain period of time. We can learn from and cooperate with Bank Indonesia and the Financial Services Authority (OJK), whose regulatory sandbox programs have run smoothly and can ensure fair business practices.

AP PHOTO/RICHARD DREW

This mobile phone app screen shot shows the logo for Dogecoin, in New York, Tuesday, April 20, 2021. Dogecoin, the digital currency advertised as the one "favored by Shiba Inus worldwide," is having its day. Fans of the cryptocurrency are touting April 20, long an unofficial holiday for marijuana devotees, as "Doge Day" and imploring each other to get its value up to $1.

In order to prevent fraud and to ensure crypto currency traders will not run away, it will be necessary to use crypto traders\' underlying assets as collateral. Later, some of the assets will be kept as a deposit. In order to protect users, their crypto assets must be stored in a secure digital container, such as crypto cold storage [crypto asset storage that can be run online and offline]. The aim is to minimize the risk of loss caused by internet theft or fraud.

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Once again, we will still discuss this with relevant stakeholders. In essence, we will prepare the ecosystem, open up and coordinate with each other, and there should be no sectoral ego.

Regarding the restructuring of e-commerce, what steps has the Trade Ministry taken?

The emergence of e-commerce, which has disrupted the domestic online and offline trading activities in the country, is inevitable. A study by the World Economic Forum (WEF) also discussed the negative impacts of the entry of cheap and low quality foreign goods through online marketplaces on local industries in a number of countries. In the context of Indonesia, they conducted a study on the hijab garment business at Tanah Abang Market in Central Jakarta.

AFP/NOEL CELIS

This file photo taken on February 5, 2020 shows a woman jogging in front of the Alibaba headquarters in Hangzhou, some 175 kilometres (110 miles) southwest of Shanghai. - China\'s e-commerce behemoth Alibaba has bought a controlling 3.6 billion USD stake in SunArt which runs hundreds of hypermarkets on the mainland for French shopping giant Auchan.

The locally made hijabs had been selling well at Tanah Abang Market, with an average growth of around 30 percent per year, before the entry of cheap foreign hijabs through online marketplaces.

They sell their hijabs to Indonesian buyers and pay only an average of US$40,000 in taxes per year.

The foreign hijab producers take advantage of artificial intelligence (AI) technology in their production activities and in identifying the tastes of hijab consumers in Indonesia. They use a large number of high-speed production machines. They sell their hijabs to Indonesian buyers and pay only an average of US$40,000 in taxes per year. The amount is not comparable to the spending of the local hijab producers on their workers’ salaries which reach an average of $640,000 per year.

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This unfair trading practice not only causes an imbalance between online and conventional traders or between foreign and domestic online traders; the data of Indonesian consumers or buyers, such as that related to taste, payment methods and identity is also “flown” abroad. These kinds of trading practices should be avoided.

We will have to rearrange the relations between domestic markets and foreign markets, the balance between online and offline trade and between domestic and international players to ensure that all trade pillars apply fair competition practices and trader-seller equality to create fair and beneficial trade.

We have revised Trade Ministerial Regulation No. 50/2020 on the licensing, advertising, development and supervision of business players in online trading. The revision is based on Government Regulation No. 80/2019 on the electronic trading system. We plan to launch the revised ministerial regulation in May 2021.

KOMPAS/PRIYOMBODO

Workers are busy at the Lazada warehouse in the Cimanggis area, Depok city, West Java, Tuesday (12/11/2019). This 30,000 square meter warehouse has a storage capacity of 2 million goods out of the company’s total capacity of 7-8 million goods and is the largest Lazada warehouse in Southeast Asia. On the day of the 11.11 discount festival, there was an estimated increase in sales of Lazada\'s e-commerce platform by up to 300 percent compared to 2018.

In this regulation, the market must maintain fair business competition among traders. The traders are also obliged to keep the prices of goods or services in their e-commerce system free from price manipulation practices, either directly or indirectly. We will find out the identities of local and foreign traders. The international marketplace must disclose the identities of traders from abroad. Foreign traders are required to register their licensing numbers, names and their issuing agencies abroad.

(This article was translated by Hendarsyah Tarmizi).