Indonesia DeFI growth in 2022
What comes to your mind when the country Indonesia is mentioned? Does this bring your imagination to a cozy vacation in Bali or possibly to the thousands of islands that are located in the country? Indonesia is a country punching above its weight in the global economy and is predicted to be the fifth largest economy in 5–10 years from now. Home to more than 250 million people, it has also shown enormous progress in the DeFI sector as the country looks to advance itself with new technology. Let’s take a look at the growth of DeFI sector in 2022 and what this means for Indonesia in the years to come.
A Growing DeFI Sector in 2022
Indonesia is a country on the up lately as it managed to recover from being one of the worst countries affected by the pandemic in 2021 to record-breaking GDP growth in 2022. The country was also recently appointed as the host of the annual G20 Summit and gathering major collaborations with many of the developed countries such as the US and UK to ensure its steady growth for the years to come. Under the leadership of President Joko Widodo many advancements have been made from infrastructure to manufacturing in order to advance the economy of Indonesia.
The country is home to a vast natural resources such as gold, copper, and natural gas just to name a few, and is one of the major exporters of Coal and Nickel to the global economy. This makes Indonesia one of the global players in the commodities sector and contributes to more than 20–25% of its National GDP. This is a good advantage that Indonesia has in its chase to the top of the global economy but also a finite one as natural resources are limited.
Over the years the country has turned to other sectors to diversify its dependency on natural resources with its “Industry 4.0” aiming to increase the integration of technology such as Blockchain, AI, and Internet of Things into the industrial system. This initiative has yielded a positive response with the Fintech sector growing at a 39% CAGR at $266 Million, the 2nd largest among the G20 Countries. This has driven stronger investor interest ever into the space, with 3 of Indonesia’s 4 Unicorns in the past 12 months in the fintech space, including Xendit, Akulaku, and Ajaib.
Technology has been a strong focus of the G20 Countries and considering there are still more than 47 million underbanked and 92 million unbanked adults, there is still room for growth in the Fintech space. Amongst this Fintech space, there has been a strong incline towards the DeFI sector due to the pandemic forcing people to work from home and digital assets becoming the next big thing for a lot of Indonesians.
According to the trade minister Zulkifli Hassan, the digital asset industry is growing by nearly 50% year to year with data as per the end of November 2022 citing there are more than 16.55 Million users on the market. These users are mainly dominated by millennials from the age of 18–30. According to the research carried out by Coinfolk, there are six provinces in Indonesia with the highest interest in digital assets such as Bali, DKI Jakarta, Banten, Yogyakarta, Riau Islands, and West Java.
Meanwhile, Indonesia also achieved a transaction value of $296.6 Million in the physical exchange of digital assets, this is significantly lower than its 2021 figures but a six-fold increase from its 2020 figures. Some of the major factors contributing to these falling figures are the sentiment around the crypto space in 2022 and the users still adapting to the new taxing system imposed on the exchange of digital assets in May 2022.
Despite the decrease in transaction value, interest remains high on digital assets in Indonesia with USDT, Bitcoin, and Ethereum being the most heavily traded across 2022. As of August 2022, there are 25 Exchangers registered and permitted by BAPPEBTI and this number has grown by more than 50% from the previous year as interest remains high. Userbases on these exchanges have also seen an increase with market leader Indodax reaching 5 Million users in 2022, a 104% increase from its 2021 figures.
Indonesia’s DeFI community is also growing beyond just exchanges. The Indonesia Blockchain Association, a local consortium and advocacy group for blockchain and cryptocurrencies, has 50 member companies and organizations as of 2023, a 50% increase from 2021. The association comprises not only exchanges but also startups and tech companies using blockchain in their ecosystem and media platforms specializing in Digital Assets.
Many of the stakeholders and members of the Indonesia Blockchain Association shared their optimism for this growth to continue in 2023 as the economy starts to recover and as regulations become more adaptive. As described to Cointelegraph by Steven Suhadi the Co–Founder of Indonesia Crypto Network and member of the Indonesia Blockchain Association, “Regulators in Indonesia over the past 10 years have become adaptable to technological changes, from e-commerce to ride-hailing and, most recently, P2P [peer-to-peer] lending. Indonesia has clearly defined rules for exchanges and crypto trading already. Over the last 24 months, regulators have taken more proactive steps for digital assets, which will help to proliferate Bitcoin and cryptocurrencies in Indonesia.”
These should then be able to boost the interest of more Stakeholders in Indonesia to enter the DeFI space which will further ensure the growth of this sector for the years to come.
What’s Next for Indonesia in 2023?
2023 has presented itself to be a better year than 2022 as prices of digital assets are on an upward trajectory and putting this into consideration, growth should continue for Indonesia this year. Indonesia is still miles apart from its ASEAN neighbors such as Vietnam, Thailand and the Philippines which has managed to secure a top 10 on the global crypto adoption index but with a massive internet penetration of more than 73% and a huge number of young population, it should have the capability to close the gap.
One of the areas to focus on to achieve the goal is changing the perception of the Digital Asset space and tapping into the technology of the future. Doing so means focusing less on Meme like tokens that will vanish into thin air in a couple of days and instead utilizing the blockchain to its true potential by bridging the gap between real-world business concepts and the DeFI space. This would then create Digital Assets that are stable and seamlessly adopted to grow the DeFI sector.
Initiatives from the Government such as the development of Digital Rupiah are also vital in ensuring the population is being adapted to the Blockchain system. Regulations from the government need to also constantly be adapted to the advancement of the Blockchain system as it could be key in ensuring a fair and equitable crypto asset management environment and emphasizing consumer rights.
Overall, Indonesia is an exciting country to watch in terms of its economy and its DeFI sector as it surely has the potential and the resources to challenge the top but its execution will be key in ensuring that it could reach there. Innovations from the stakeholders within the Indonesia Blockchain space will also be a major factor in ensuring that the inventions from the country have the ability to challenge global dominations. The question is who will step up to make it happen?
We at Nagaya Technologies certainly believe that Indonesia has a huge potential to become a global leader both in the Economic and DeFI space. We hope that the development going on in Indonesia should be able to help the recovery of the DeFI space. That is also why we created the world’s first hybrid digital assets called Nagaya which will soon be a part of the revolution needed towards sustainable Digital Assets for the Indonesia and Global DeFI space. Interested to know more about Nagaya, you can visit our website at www.nagaya.co
Or you can talk to us at t.me/nagayaofficial
