Guideline On Crypto Asset Trading: Key Points In The Commodity Futures Trade Supervisory Board Regulation No. 8 Of 2021 On Implementing Guideline Of Physical Market Trading Of Crypto Assets In The Futures Exchange

To provide public certainty in crypto asset trading, the Commodity Futures Trade Supervisory Board/ Badan Pengawas Perdagangan Berjangka Komoditi ("Bappebti") has issued Regulation No. 8 of 2021 on Implementing Guideline of Physical Market Trading of Crypto Assets in the Futures Exchange ("Reg. 8/2021"). Reg. 8/2021 revokes the previous Bappebti regulations regarding Crypto Assets, which stipulated the amended guideline of crypto asset trading in the market.

Article 13 (2) Reg. 8/2021 stipulates that a crypto-asset physical trader who wants to be a facilitator in the crypto asset market must obtain an approval from Bappebti. This regulation also limits the scope of activities of a crypto asset physical trader, to include as follows:

1. Sell and/or purchase of crypto assets between Crypto and Rupiah currencies;
2. Exchange one or more types of crypto assets;
3. Storage of crypto assets owned by the customer; and
4. Transfer or relocate crypto assets between wallets.

In this article, we provide several changes in Reg. 8/2021, including those on the requirements for Crypto Asset Trading, Crypto-Asset Traders, and Prospective Crypto Asset Traders.

A. Requirements for Crypto Asset Trading

Pursuant to Article 3 (2) Reg. 8/2021, crypto assets traded in the market must conform to certain requirements to make them lawful as tradable crypto assets. The requirements for a tradeable crypto asset are:

1. the asset is based on distributed ledger technology;
2. it is in the form of utility crypto asset or crypto backed asset; and
3. it has passed the assessment with the Analytical Hierarchy Process ("AHP") method set by Bappebti.

During the AHP assessment, Bappebti must consider several conditions, which are (Article 3 (3) of Reg. 8/2021):

1. the crypto asset market capitalization value (coin market cap);
2. the asset is included in a major transaction exchange for crypto assets;
3. the asset has economic benefits to offer (i.e., taxation, digital economic growth, information technology ("IT"), information industry, and competency of IT field experts); and
4. the asset has completed a risk assessment including the risks of money laundering, terrorism financing, and weapons of mass destruction financing.

If the crypto asset is deemed tradable in the crypto asset physical market, Bappebti will issue a stipulation and the asset will be included in Bappebti's list of crypto assets. Furthermore, Article 5 paragraph (1) of Reg. 8/2021 stipulates that a crypto asset trading can only be conducted using an electronic tool owned by the physical trader, where the trade process is facilitated and supervised by the futures exchange and approved by the Head of Bappebti. In addition, the Futures Clearing Agency responsible for the clearing and completion of the transaction must obtain the approval of the Head of Bappebti.

B. Prospective Crypto Asset Trader

Article 40 paragraph (1) of Reg. 8/2021 stipulates that if the futures exchange and clearing agency are not registered at Bappebti, a business actor that carries out activities as described in Article 13 (2) Reg. 8/2021 must register the company at Bappebti as a prospective crypto-asset physical trader ("Prospective Trader"). For the registration, the Prospective Trader must meet the following prerequisites:

1. it has a minimum paid-up capital of Rp50,000,000,000 (fifty billion Rupiahs); and
2. it maintains an equity of, at least, 80% (eighty percent) of the paid-up capital;

Furthermore, the Prospective Trader must provide the following documents to Bappebti:

3. Copy of deed of establishment and the identities of the company's executives;
4. Written brief explanation regarding the company's organizational structure including its responsibilities, products, business process, and code of conduct;
5. Proof of the electronic system submission to the Ministry of Communication and Information ("MoCI");
6. Business plan and financial projection for the next 24 (twenty four) months; and
7. Other required documents as mentioned in the appendices of Reg. 8/2021.

Once the requirements are deemed complete, the Head of Bappebti will issue a registration receipt for the Prospective Trader within 3 (three) working days ("Prospective Trader Registration"). The registration will remain valid until Bappebti issue the licenses for both the futures exchange and clearing agency.

C. Requirements for Crypto-Asset Trader

If the licences are issued, the Prospective Trader must apply for an approval to Bappebti as a physical trader of crypto assets ("Crypto Asset Trader") within 1 (one) month, and they must comply with all requirements under the crypto-asset trader license within1 (one) year since the submission of the application (Article 42 Paragraphs (1) and (2) of Reg. 8/2021). Failure to complete the process will cause the Prospective Trader's registration to be declared cancelled and void.

A Crypto Asset Trader must fulfil the requirements as stipulated in Article 14 (1) Reg. 8/2021:

1. Having the minimum paid-up capital of IDR 80,000,000,000 (eighty billion Rupiahs);
2. Maintaining an equity of, at least, 80% of the paid-up capital;
3. Having a company structure with, at least, 6 (six) divisions (i.e., IT, audit, legal, customer complaint, client support, accounting, and finance);
4. Owning a system or tool for online trading to facilitate the implementation of crypto-asset physical market, which is connected to both the futures exchange and clearing agency;
5. Having official trading rules;
6. Having a Standard Operating Procedure or SOP;
7. Having, at least, one employee who is a Certified Information Systems Security Professional ("CISSP"), or who is in cooperation with an institution that has the experts, or who directly cooperates with CISSP experts; and
8. Having the potential board of directors, commissioners, shareholders, controller or beneficial owner that have passed the fit-and-proper test conducted by Bappebti.

Furthermore, based on Article 16 (1) of Reg. 8/2021, any change in the address, name of the company, management or shareholding composition, system, trading rules, including in the opening of any branch office requires Bappebti's approval. This applies to both the Prospective and Crypto Asset Traders.

D. Transition Terms

A business actor which has previously registered as Prospective Trader before the issuance of Reg. 8/2021 (i.e., 29 October 2021) must already observe the new provisions of Reg. 8/2021 within no more than 6 (six) months after the date of issue.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.