Crypto Exchange Risk Mitigation Scheme Needs to Be Prepared

Crypto assets are a high-risk investment instrument. The presence of crypto exchanges is expected to guarantee the safety of crypto asset investors through a transaction monitoring mechanism.

The following article was translated using both Microsoft Azure Open AI and Google Translation AI.

KOMPAS/TOTOK WIJAYANTO (TOK)

The silhouette of Trade Minister Zulkifli Hasan during his speech while inaugurating the cryptocurrency exchange (Commodity Future Exchange/CFX) in Jakarta on Friday (28/7/2023).

JAKARTA, KOMPAS — As an instrument with a high risk profile, futures trading crypto assets through exchanges requires mitigation support, including from a regulatory aspect . The government, through the Commodity Futures Trading Supervisory Agency or CoFTRA, is considering trade security features to guarantee public transactions.

Indonesia officially has a crypto asset futures exchange which was launched on Friday (28/7/2023). The exchange is managed by three institutions, namely PT Bursa Komoditi Nusantara (CFX) as the organizer of the exchange, PT Tennet Depository Indonesia as the manager of the depository, and PT Kliring Berjangka Indonesia as the guarantee and settlement institution for the physical market for crypto assets.

Researcher from the Digital Economy Desk of the Institute for Development of Economics and Finance (Indef), Nailul Huda, Saturday (5/8/2023), said that transaction management and supervision will facilitate crypto asset futures trading. Price control instruments, such as Upper Auto Rejection (ARA) and Lower Auto Rejection (ARB) implemented by the Indonesia Stock Exchange (IDX) can serve as a reference for crypto exchanges.

As known, Auto Rejection is an automated system that regulates trading so that it can run smoothly, orderly, efficiently, and can protect investors from extreme price movements. The system will automatically function when the stock price exceeds the upper limit (ARA) or lower limit (ARB) according to applicable regulations.

"With the existence of such an instrument, it can prevent the public from suspicious movements of crypto asset prices that potentially cause harm, such as 'crypto junk' assets," he said when contacted from Jakarta."

Transaction regulation and monitoring will facilitate cryptocurrency futures trading.

Crypto Hard Times 2022

However, Nailul reminded that a study is needed first regarding the limit of suspicious transactions. On the other hand, this mechanism can also provide an opportunity for crypto assets to grow in the future.

In line with Nailul, Senior Investment Information Mirrae Asset Sekuritas Indonesia M Nafan Aji Gusta Utama explained, crypto exchanges are required to guarantee the safety of investors in investing, one of which is through the ARB/ARA scheme. This cannot be separated from the global exchange mechanism which has rules of the game, namely suspension (freezing) of suspicious transactions.

"Crypto assets include instruments that have a high risk profile and are included in the futures product forex market (foreign exchange market). Even though it has a high level of risk, the returns are also high and can even be faster than other instruments. Therefore, it needs to be balanced with literacy for investors," he said.

We will complete the features, both for the product and related to security. For example, later, when there is a suspicious transaction, we will suspend (freeze), something like that.

Literacy provided to the public, continued Nafan, is not just about introducing crypto assets as high risk (high risk high return) instruments. People also need to understand trading psychology, financial management and risk management.

Previously, Head of the Commodity Futures Trading Supervisory Agency (Bappebti) Didid Noordiatmoko explained, crypto exchanges were still limited to physical trading or buying and selling of crypto assets (spot trading). However, it is possible that crypto exchanges will be developed and equipped with various innovative features.

One of these features, continued Didid, is related to security for the public in transactions. As is known, crypto asset trading tends to have high volatility so that the risk profile is also high.

KOMPAS/AGUSTINUS YOGA PRIMANTORO

Head of the Commodity Futures Trading Regulatory Agency (Bappebti), Didid Noordiatmoko, gave a statement to journalists regarding the scheme for crude palm oil (CPO) and cryptocurrency exchanges, in Jakarta on Thursday (August 3rd, 2023).

“We will complete the features, both for the product and related to security. For example, later, when there are suspicious transactions, we will suspend (freeze), something like that," he told journalists, Friday (4/8/2023).

Didid added, it is possible that exchanges will innovate by having features, ranging from derivative trading, staking, non-fungible tokens (NFT), to investments like mutual funds. In an effort to develop this innovation, CoFTRA will continue to oversee the crypto asset ecosystem.

Although some parties consider the launch of the crypto exchange last week to be late due to the declining trend of crypto assets, Didid is optimistic that crypto assets have a bright prospect. "It's like fixing the ship while the river is low. So, when the tide is high, we can sail again," he said.

Also read: Government Completes Crypto Ecosystem

Based on data from Bappebti, the total value of crypto transactions in 2021 reached Rp 859.4 trillion and decreased to Rp 306.4 trillion in 2022. Meanwhile, in the period of January-June 2023, the value of crypto asset transactions was recorded at Rp 66.44 trillion with a registered customer base of 17.54 million people as of June 2023.

"In an effort to develop these innovations, Bappebti will continue to monitor the cryptocurrency asset ecosystem."

Registration process

Currently, 30 candidates for physical crypto asset traders (CPFAK) have not yet re-registered with Bappebti. However, the main requirement for crypto exchanges to operate on August 17, 2023 is for these 30 CPFAK to register with Bappebti.

Chairman of the Association of Indonesian Crypto Asset Traders (Aspakrindo) Robby said, 30 CPFA, are currently submitting all the required documents as stated in the Decree (SK) of CoFTRA Number 13 of 2022 concerning Amendments to CoFTRA Regulation No 8/2022 concerning Guidelines for Conducting Market Trading Physical Crypto Assets (Crypto Assets) on the Futures Exchange.

TOKOCRYPTO

Crypto Asset Trading Mechanism in Indonesia

After that, a physical check as well as a fit and proper test for crypto asset traders will be carried out. Then, traders will get an exchange member approval letter (SPAB).

"This SPAB will be reported to Bappebti to get approval as a physical trader of crypto assets. So, there will be two physical checks and a fit and proper test. After everything is finished, a license is issued as a physical trader of crypto assets," he said when contacted from Jakarta.

Also read: Bappebti Sets Exchange, Clearing and Crypto Asset Storage Managers

Robby added that the current condition of the crypto asset market was sluggish and interest in crypto asset transactions was declining. This is because the transaction fees for trading crypto assets in Indonesia are less competitive compared to global transactions.

Regarding the trading mechanism that will limit transactions (ARB/ARA), Robby thinks that this policy is irrelevant to the condition of crypto assets. This is because crypto assets are borderless and global trading does not apply that.

"When the price drops, people will buy outside and sell here (Indonesia's cryptocurrency exchange). Then, who will buy here? Conversely, when the price rises and is limited, people will automatically buy cheaply in our place and sell outside," he said.