Indonesia Watchdog Blocks Cryptocurrency Lending Platform

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Indonesia’s Financial Services Authority, known as OJK, has identified and blocked almost 300 illegal peer-to-peer lending platforms, which includes one cryptocurrency firm.According to Nikkei, OJK’s investment alert unit joined hands with the IT ministry and local police to launch a crackdown against unlicensed FinTech platforms. The investigations found that most of the unregistered lending platforms had servers located in Indonesia, but a few of them were operating from outside the international borders. Nevertheless, OJK did not reveal the names of sacked entities, particularly the one that was facilitating cryptocurrency loaning between Indonesians.“Once a fintech platform has been verified as illegal, we will directly block it. By blocking these illegal platforms, we hope to protect the consumers and the public,” said Anthonius Malau, acting director of informatics application control at the Indonesian IT ministry.The BackdropThe crackdown follows years of development in the cryptocurrency-enabled lending industry. Unlike the traditional mechanisms, wherein people rely on banking approvals to secure loans, a decentralized financing approach allows people to undergo a short-cycled approach. A borrower can connect to potential lenders via web portals and collect financing in the form of decentralized cryptocurrencies, such as bitcoin, ether, or portal-enabled native tokens.The exercise, albeit seamless, also creates opportunities for fraud. Fintech startups might attract funds from small investors to run P2P lending platforms and go default at later stages, as evident in the many cases arising from another Asian economy China. Certain cryptocurrency platforms, in particular, have a history of disappearing with investors’ money. BitConnect, a cryptocurrency lending platform that was highly active in Indonesia, vanished with about $250 million of funders’ money.

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