Southeast Asia as a whole presents huge opportunities for the digital economy, due to its high consumption of internet-based services and its relatively young but significantly unbanked/underbanked population. But Indonesia in particular could soon emerge as the dominant country in the regional and even global crypto market.
According to Gemini’s recent Global State of Crypto report, Indonesia has the highest crypto ownership (41%) among adults earning more than US$14,000 annually. The Indonesian Ministry of Trade estimates that the country currently has 14 million crypto users, up from 6.6 million users in June last year.
Data from YouGov also suggests that the archipelago nation is one of the largest adopters of cryptocurrencies in the world, with transaction activity having exceeded twice the global average in April 2022.
“With one of the fastest growing and largest economies in the world, poised to dominate, Indonesia has always been a key area of interest for founders and investors. Indonesia has consistently shown an ability to leapfrog technological progress in traditional fintech and technology, and we believe this will be the case with crypto and blockchain,” Chia Jeng Yang, investor at Pantera Capital, told Blockhead.
Read more: Can Southeast Asia Kickstart Web3?
While Indonesia’s economy continues to grow by leaps and bounds (the country’s economic growth rate in the third quarter of 2022 is estimated to reach 5.2% and 4.8% in the fourth quarter), the debasement of the Indonesian Rupiah, which has lost 84% of its value since the late 1990s, gives retail investors seeking high yields food for thought.
“In the next five years, we expect Indonesia to reach crypto adoption similar to where the US is today (~10% of population), and touch over 30 million users,” wrote Hemant Mohaptra, partner at Lightspeed Capital, in a blog post.
“Our company, Pintu, has actually seen continued user growth and a net inflow of user AUM to their platform all through the last few quarters as opposed to other markets such as the US or India where most leading crypto exchanges have seen strong net outflow of user’s capital from their exchange wallets,” Mohapatra told Blockhead.
An untapped market
At the recent Coinfest Asia conference held in Bali from August 25 to 26, Blockhead spoke to Timothius Martin, chief marketing officer at Pintu, who believes that the crypto scene in Indonesia is currently dominated by play-to-earn games.
According to Martin, Indonesia has 100 million gamers or about 40-50% of the total amount of gamers in Southeast Asia, which means that there is a strong market for blockchain-based gaming, provided that firms are able to onboard more users from web2.
However, Martin also highlighted that Indonesia could start exploring the non-crypto/NFT applications of blockchain technology in the future.
“We have 170,000 islands, so there’s going to be a lot of projects around logistics”, he said, adding that digital IDs could also benefit from using blockchain technology given the current inefficiencies.
For Chris Sirise, founding partner of Saison Capital, the market opportunity for Indonesia to lead web3 innovation should not be overlooked, as many Indonesians have already taken the leap from being crypto curious to web3 savvy. He also believes that Indonesia has a rich talent pool – a “large cohort” of young talent from web2 sectors who would be able to switch to a web3 career at a very low opportunity cost.
Sirise also noted that Indonesia’s traditional finance infrastructure remains underdeveloped, which in turn provides an access point for the web3 industry.
“Even with fintech solutions in the market, existing infrastructure in Indonesia remains difficult to access for large segments of the population for complex reasons ranging from income barriers to geographical constraints,” he explained.
As governments around the world continue to grapple with regulating the financial aspects of blockchain technology, a country like Indonesia which has the potential to effectively utilise the technology in other areas apart from cryptocurrencies is well-positioned to become a global blockchain hub.