OJK Warns of New Cryptocurrency-Based Investment

Indonesia, like other emerging markets, has historically struggled to keep accurate records due to a lack of expertise and resources, but the public and private sectors are now looking at blockchain technology to overcome some of these challenges. (Reuters Photo/Dado Ruvic)

By : Adinda Normala | on 1:49 PM January 26, 2018
Category : Business, Banking/Finance

Jakarta. The Financial Services Authority, or OJK, urged Indonesians to refrain from owning, acquiring or trading cryptocurrency on Thursday (25/01), following a pre-launch event of cryptocurrency-based investment products by Aladin Capital.

According to a statement received by the Jakarta Globe, Aladin Capital is a global financial group based in the United States and Switzerland. It offers opportunities for investors with low to medium levels of capital and specializes in businesses involved in the trading and mining of cryptocurrencies, especially Aladin Coin (AIC).

"Cryptocurrencies as payment systems have been prohibited by the authorities […] and if the product is related to it, then it is prohibited," OJK chairman Wimboh Santoso said, adding that he will check if Aladin Capital has been registered as a payment system provider.

Payment system providers that facilitate financial transactions in cryptocurrencies will be fined and will risk losing their operating licenses.

Last year, OJK closed down four investment funds for accepting money from the public to invest in cryptocurrencies, including Dunia Coin Digital, Dinar Dirham Indonesia, Tracto Venture Network Indonesia and Purwa Wacana Tertata, for lack of permits to gather funds from the public.

Aladin Capital claimed its coin is predicted to be valued at $10,000 by 2026, increasing from only $20 this year, implying a huge profit by investing in the digital token.

The Ministry of Finance and Bank Indonesia have previously warned of the risks that virtual currency has in forming a bubble that can disrupt financial system stability and ultimately harm the public.

The central bank has also banned cryptocurrency as a financial transaction instrument in Indonesia.

The biggest cryptocurrency exchange in Indonesia is currently Bitcoin Indonesia, which boasts more than a million members.

Wimboh said OJK will continue to educate the public to understand the risks of investing in cryptocurrency, which has repeatedly prompted Indonesians to avoid using the currency.

"We will educate the public to be careful to avoid commotion [if losing money after investing in cryptocurrency]," Wimboh said, adding that the government will not bear any responsibility if there are still people who choose to invest.

Cryptocurrency is considered very risky and highly speculative as it lacks control by responsible authorities and the absence of underlying asset backing. The currency has also caused a considerable amount of losses in the past.

Mt. Gox, the then-world’s biggest bitcoin exchange, collapsed in 2014 after hackers stole 650,000 bitcoins, triggering a collapse in the bitcoin price. The downfall of Mt. Gox left more than 24,000 customers unable to access hundreds of millions of dollars of cryptocurrency and cash. No customers have yet managed to retrieve a cent.

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