Indonesia is working to tap into the economic potential of cryptocurrency and safeguard users through strict approval processes. However, its licensing framework is raising concerns among stakeholders, says Tuhu Nugraha, principal of the Indonesia Applied Digital Economy and Regulatory Network (IADERN).

Nugraha, who also works as an adviser to the Indonesian government, believes there are challenges surrounding the country’s Physical Crypto Asset Trader (PFAK) license, which authorizes organizations to trade crypto and provide crypto services. 

The executive told Cointelegraph that only a few hold the license, raising concerns about the emergence of “monopolistic or oligopolistic market conditions.” 

An oligopolistic market is an economic setup in which only a few companies rule over many. In this situation, new companies will find it difficult to penetrate the market. 

A few players may “dominate” the market

On Sept. 9, Binance subsidiary Tokocrypto secured a PFAK license from Indonesia’s Commodity Futures Trading Regulatory Agency (Bappebti). In an announcement, Tokocrypto CEO Yudhono Rawis highlighted that the company is only the “third” company to receive the license in Indonesia. 

Nugraha believes that with only a few holding the licenses, consumers are subjected to limited options, which may lead to higher fees. He explained: 

“There is a risk that these players may dominate the market, limiting consumer choices and leading to higher transaction fees. Such a scenario could ultimately stifle innovation and reduce the competitiveness of the Indonesian crypto market.”

Nugraha explained that many exchanges are currently still waiting for approval. The executive also added that the prolonged and complex registration process slowed the entry of new exchanges in the market. He believes this “hampers growth and innovation in Indonesia’s crypto ecosystem.”

“This long approval process can hinder the competitive landscape, making it difficult for smaller or newer exchanges to thrive,” Nugraha added. 

High capital requirements create barriers for smaller exchanges 

Apart from these, Nugraha also stated that Indonesia has high capital requirements for obtaining a PFAK license. The executive said this creates a big barrier for smaller local exchanges wanting to get regulated. Nugraha said: 

“The substantial financial commitments needed for these requirements limit the participation of smaller market players, leading to reduced competition and potentially hindering the diversification of services within the sector.”

Nugraha added that even though Indonesia has a regulatory framework for crypto, there is still a lack of legal clarity in some areas of crypto regulation, which creates uncertainties for market participants and investors. 

“This ambiguity, coupled with ongoing regulatory developments, could deter further investment and impede the sector’s broader advancement,” he added. 


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