In a sign that crypto trading could slowly become the next big game-changer in Indonesia, local conglomerates are betting big on the sector to woo a new set of investors amidst the COVID-19 pandemic.
Media and technology giant Elang Mahkota Teknologi Tbk (Emtek Group), and Lippo Group, among others, are in initial talks to forge a partnership with Binance, the world’s largest cryptocurrency exchange by trading volume, as the latter gears up to foray into Southeast Asia’s biggest economy, sources privy to the matter told DealStreetAsia.
Binance plans to partner with several Indonesian conglomerates as it looks to set up a crypto exchange in the country and “get a monopoly over others,” said one of the persons mentioned above.
Last year, Binance had acquired a majority stake in Jakarta-headquartered Tokocrypto, a crypto exchange founded in 2018.
When contacted, both Emtek Group and Lippo Group executives declined to comment on the development, while Binance cited it as a “market rumour.”
In a separate development, Sinar Mas Group, one of the largest conglomerates in the archipelago, is looking to launch crypto tokens and a multi-asset platform by the end of this year, confirmed a senior executive of the company.
Finer nuances of the proposed crypto deals
Sinar Mas is currently working with Tokocrypto as it seeks to explore ways to integrate crypto applications in traditional financial sectors, thereby allowing the digital currency to be aligned with credit cards, bank loans and insurance products.
Under project ‘Nanobyte’, Tokocrypto will provide the know-how and network to Sinar Mas, while the latter will get its vast database of customers.
Fuganto Widjaja, an executive board member at Sinarmas Financial Services, said: “We believe in decentralization of the project and the project will be community-owned. Sinarmas is working with Nanobyte to drive the adoption of crypto and blockchain in the region.”
Meanwhile, Hutama Pastika, CEO at Nanobyte, added: “Crypto is far from mainstream in Indonesia. Indonesia has 270 million people, but only 6.5 million crypto users and investors. By working with both traditional and crypto players, we can make crypto mainstream, allowing use case beyond investing realm, but also in insurance, lending, payment, and other applications.”
Going forward, Sinarmas first plans to launch the investment app Nanovest by the fourth quarter of 20201. The investment platform will allow people to invest in multiple asset classes including crypto and traditional financial assets, the company claims. “One KYC is enough to do investment in all assets on the platform with investment size as small as Rp 5,000,” Pastika added.
Binance, on the other hand, seems to have ambitious plans for the Indonesian market. This is despite the fact that it has attracted the wrath of the regulators in various countries, the latest one being Singapore. A few weeks ago, the MAS ordered Binance to stop offering its services due to a potential breach in local payment rules, including soliciting business from Singapore residents without the right licence.
“The company is talking to Emtek and Lippo for an equity joint venture (JV), wherein it plans to hold majority stake… if talks go through, Binance will provide the technology to build the crypto trading platform,” said one of the sources, highlighting its plans for Indonesia.
Crypto assets are increasingly gaining popularity in the archipelago. According to data available with the Trade Ministry, the number of total crypto users in Indonesia touched 7.4 million in July 2021 in comparison to 4 million users in 2020. Investment transactions during the period soared to Rp 478.5 trillion ($33.58 billion), recording over 600% growth from Rp 65 trillion ($4.56 billion) in 2020.
There are currently 13 crypto exchange firms in Indonesia. These include names like East Ventures-backed Indodax, Intudo Ventures-backed Pintu, among others.
However, this does not mean that the sector is devoid of challenges. Currently, crypto is not recognised as a means of payment in the country – it is treated more as an asset or commodity traded on a futures exchange. Hence, it is not very widespread and people lack understanding.
Amongst current transactions sealed in the market, Jakarta-based crypto exchange Pintu raised $35 million in August 2021. Investors who participated in the funding round include Lightspeed Ventures, Coinbase, and Intudo Ventures. Meanwhile, others who raised capital in Southeast Asia this year include Zipmex, and Matrixport – both headquartered in Singapore – and the Phillipines-based crypto exchange PDAX. While Zipmex secured $41 million, Matrixport and PDAX raised $100 million and $12.5 million, respectively.