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DealStreetAsia

Crypto action heats up in Indonesia as Tokocrypto weighs IPO

Country is hot spot for digital currency, based on government data

The number of cryptocurrency traders in Indonesia is estimated at 4 million and is expected to grow exponentially given the size of the country's population at 275 million, industry watchers predict.    © Reuters

JAKARTA -- In a sign of the rise of cryptocurrency in Indonesia, the global cryptocurrency exchange Luno is said to be weighing entry into the Southeast Asian market. At the same time, Binance-backed local operator Tokocrypto is looking at a public market debut.

Luno is understood to be in talks with conglomerate Lippo Group to set up a joint venture to start operations in the country, according to two people familiar with the development.

Based in London, with regional hubs in Singapore and Cape Town, South Africa, Luno was acquired last year by Digital Currency Group (DCG), which builds, buys, and invests in blockchain companies. Luno operates as an independent, wholly owned subsidiary of DCG.

Talks between Luno and Lippo Group are in the early stages, those familiar with the matter added. One of Luno's early investors, Venturra Capital, which is backed by Lippo Group, is said to support the joint venture plans.

Industry sources indicate that Luno and Lippo will contribute equally to the venture. The initial capital requirement for the exchange is said to be under $10 million. The parties are in the process of obtaining a license for the venture, the sources added.

In an email response, a Venturra Capital spokesperson told DealStreetAsia, "Venturra has been an early supporter at Luno since we led their Series A [funding round] in 2015. We plan to continue the working relationship and support, even after the acquisition by DCG, especially in Indonesia." Venturra, however, refrained from specifically commenting on the deal between Lippo and Luno.

Luno has yet to respond to a DealStreetAsia request for comment.

Meanwhile, Indonesia's first regulated cryptocurrency exchange, TokoCrypto, is looking at a public market debut over the next two to three years.

TokoCrypto CEO Pang Xue Kai said: "I'm saying two years because we need to be profitable for at least more than two years before listing. We are already profitable now. Our key focus at Tokocrypto is to grow the business further, expand our operations to more parts of Indonesia and make crypto mainstream in the country."

Tokocrypto has clocked $10 million in annualized profits to date, based on 0.1% transaction fees charged on trading volume on the exchange platform.

"Valuation-wise, it is premature [to talk about] as [an IPO] is still two to three years down the road, but a close reference would be Coinbase of the U.S. Currently, we are monitoring the market, scaling the business, building the team and products," Kai added.

Founded in 2018, Tokocrypto, which is backed by cryptocurrency exchange major Binance and QCP Capital, is regulated through Indonesia's Ministry of Trade by the Commodity Futures Trading Regulatory Agency.

Tokocrypto launched its token offering (TKO) on the Binance platform last month. Around 200,000 people participated in the offering and committed around $4.2 billion, the company says.

Tokocrypto said it holds approximately $1 billion worth of TKO tokens and has 800,000 users; it claims to acquire a new user every five seconds.

TKO token holders gain access to trading fee discounts, airdrop entitlements, merchandise redemption, and incentives for mass adoption.

TKO tokens can be used in Decentralized Finance programs, such as TKO Deposit, TKO Savings, and TKO Cashback. TKO tokens will be the backbone of the NFT marketplace (TKONFT Arcade) and the payment gateway between creators and their audiences. TKO NFT Arcade is a marketplace for digital collectibles and creative assets from emerging artists.

Indonesia is slowly emerging as a hot spot for crypto-related action, if government data is an indicator. The value of crypto asset trading in the country amounted to 64 trillion rupiah ($4.44 billion) in 2020. In the first two months of this year, the value of crypto assets trading breached the 6 trillion rupiah mark.

The number of cryptocurrency traders in Indonesia is estimated at 4 million, and that figure is expected to grow exponentially, given the country's population of 275 million, industry watchers predict.

In terms of funding activity, Jakarta-based crypto exchange Pintu made headlines last week, raising $6 million from a slew of investors, including Pantera Capital and Intudo Ventures, to build brand awareness, ramp up head count and develop new features.

The biggest challenge that industry players face is the lack of understanding and awareness related to blockchain technology.

In Indonesia, crypto is not recognized as a means of payment, but is treated as an asset or commodity traded on a futures exchange. Hence, it is not very widespread, industry players point out.

"However, with the ongoing crypto hype, it is not that hard for us to convince investors and retailers to invest in crypto assets. We have around [120,000 weekly active traders] and it is growing all the time, which shows that the adoption of crypto assets is increasing day by day, especially in Indonesia," said Afid, a trader on the Tokocrypto platform.

For the original story from DealStreetAsia, click here.

DealStreetAsia is a financial news site based in Singapore that focuses on private equity, venture capital and corporate investment activity in Asia, especially Southeast Asia, India and greater China. Nikkei owns a majority stake in the company.

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