Indonesia bars financial institutions from offering crypto services

Advises citizens to avoid 'Ponzi schemes'

Another week, another big economy restricting cryptocurrency. This time Indonesia has barred financial services firms from offering bit-buck-related services to their customers.

In the tweet below, Wimboh Santoso, commissioner of Indonesia's financial services authority the Otoritas Jasa Keuangan (OJK), states that the agency has prohibited financial service institutions from using, marketing, and/or facilitating crypto asset trading. In a later tweet, Santoso warned that his agency does not regulate crypto trading and that the value of crypto assets can fluctuate widely.

The regulator also warns of Ponzi schemes – investment scams that pay existing investors with funds collected from new investors – associated with cryptocurrency investment.

Indonesia is the world's fourth most populous country, and its sixteenth-largest economy. The nation is also the president of the 2022 meetings of the G20 group of nations and has made small business participation in the digital economy one of its priority issues in that forum. It also has a majority Muslim population, and local religious authorities have advised that cryptocurrency is not a suitable currency or investment for the faithful.

The nation's government also allows crypto mining.

The new advice therefore restricts crypto trading but falls well short of a ban.

But it also follows Russia's proposed ban on cryptocurrency on grounds including its riskiness as a retail investment. China has also opposed cryptocurrency for the same reason, and plenty of financial regulators around the world have warned of their unhelpful volatility.

That volatility has been on full display in recent weeks. The value of Bitcoin has fallen 28 per cent, Ethereum fell 40 per cent and Litecoin dropped by 31.5 per cent.

Many cryptocurrency advocates have suggested the digital dollars will do well in emerging economies. Indonesia may just have weakened that theory a little. ®

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