Indonesia tightens regulations amid crypto winter

In The Top Up this week, we dive into Indonesia’s latest crypto regulations and examine layoffs at fintech unicorn Xendit. [Read from your browser]( The Top Up 💵 Welcome to The Top Up! Delivered every Wednesday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in fintech. If you’re not a subscriber, get access by [registering here](. Written by Jofie Yordan Journalist Hello {NAME} To say that crypto firms aren’t doing well right now would be an understatement. Many of my friends have pulled back from investing in such assets in the middle of the crypto winter. Those still seeking “instant profits,” meanwhile, have turned to other investment instruments. But there are many others who are buying crypto amid tough times, with the hope that the situation will get better. However, things just got even harder in Indonesia after the government tightened crypto regulations. The country’s latest rules mandate that crypto trading platforms have 100 billion rupiah (US$6.5 million) in paid-up capital, up from the current 50 billion rupiah (US$3.3 million). While the move could eliminate non-legitimate players, it poses a challenge for smaller crypto companies in the archipelago. My colleague Budi dives deeper into this new regulation and how it could impact the industry. Meanwhile, in this week's Hot Take, I examine several of reasons that may have led to layoffs at Indonesia-based Xendit, which affected 5% of its employees in two markets. Given how the fintech unicorn just raised funds a few months ago, many were surprised by the job cuts. – Jofie  --------------------------------------------------------------- THE BIG STORY [Indonesia’s crypto exchanges face fuzzy path to regulations]( The proposed rules might make things tough for smaller firms, but on the whole, Bappebti's regulations are still up in the air.  --------------------------------------------------------------- THE HOT TAKE  Why Xendit laid off employees after raising $300m in May Here’s what happened: - Xendit [slashed 5%]( of jobs last week in its current markets, Indonesia and the Philippines. - The Jakarta-based fintech unicorn attributed the move to the “uncertain macroeconomic situation.” - This comes after the firm raised US$300 million in a series D funding round led by Coatue and Insight Partners in May. Here’s our take: Xendit seemed to be on an unstoppable upward trajectory - until it was not. Given its [mammoth fundraise]( in May, the layoffs were a surprising move for the company, whose road [towards becoming a unicorn we tracked](. In a company statement, Xendit said the headcount reduction was "based on the business strategy by seeing the future situation." There were little signs of trouble before this. In 2021, the company recorded [200 million transactions]( with total payments value jumping from US$6.5 billion to US$15 billion. Xendit planned to use the fresh funds to double down on its existing markets and to enter new ones like Malaysia, Thailand, and Vietnam. It had also been looking to add “value-added services” including ledger management, fraud detection systems, e-KYC (know-your-customer), and [potentially]( a banking-as-a-service offering. These developments likely entailed a significant cost. While rising inflation and surging fuel prices may have restrained the pace of digital transaction growth and spending in the country, Indonesia's central bank data has shown otherwise. In August, the value of [electronic money transactions]( actually grew 43% year on year. Payment transactions value using debit cards and credit cards also increased by 34%. That said, some of Xendit’s clients may have fallen on hard times. In September, digital asset exchange Tokocrypto [terminated 20% of its employees]( amid the crypto and funding winter. Tokocrypto CEO Pang Xue Kai said that the average transaction volume at the company [fell by 50%]( from the peak period. Another Xendit client, co-working spaces startup CoHive, also appears to be in trouble - it [reportedly]( shuttered a number of its spaces in Indonesia. However, these represent just two of Xendit’s enterprise clients, which includes Traveloka, Grab, and Bukalapak and other heavyweights in Southeast Asia’s tech industry. Traveloka, which has experimented with [food delivery and logistics]( services, will refocus on its core business. Bukalapak experienced [105% revenue growth]( in the second quarter of 2022 from last year, while Grab saw a [79% growth in revenue]( in the same period. Xendit also serves [more than 2,000]( microbusinesses and small and medium-sized enterprises (MSMEs), which could be affected by soaring prices in Indonesia. The recent increase in fuel prices is believed to have an impact on prices in various sectors. Xendit has also had to fend off local competitors such as GoTo's Midtrans and Emtek-backed Doku. Within Indonesia, Doku leads with [150,000]( merchants on its platform. In comparison, Midtrans has [8,000 merchants]( while Xendit has 3,000. Apart from domestic competition, Xendit also has to fight regional battles with players including 2C2P, Razer Fintech, PayMongo, and HitPay. Xendit's efforts to localize in its target countries would certainly be costly. The company, however, will benefit from a gradually recovering economy - as far as global travel is concerned. This could boost Xendit's transaction volume further, particularly from clients including Traveloka, Tiket.com, Garuda Indonesia, and hotel chain startup Oyo. – Jofie  --------------------------------------------------------------- NEWS YOU SHOULD KNOW Check out Tech in Asia’s coverage of the fintech scene [here](. 1️⃣ [Alipay removed from Shanghai priority high-tech firms list]( The company, owned by Alibaba’s Ant Group, was dropped because it didn’t meet R&D spending requirements, according to a notice from the Chinese government. 2️⃣ [Fiserv-backed Korean fintech firm secures $24m]( Korea Credit Data aggregates data on business transactions and offers revenue management solutions via the messaging app KakaoTalk. 3️⃣ [Shariah fintech firm Alami closes pre-series B round led by East Ventures]( Founder and CEO Dima Djani said Alami is seeing strong long-term potential in Sharia-compliant financing for Indonesia’s 230 million-strong Muslim population and Muslim-centered SMEs. 4️⃣ [Australian proptech firm brings home $5.2m in seed capital]( PropHero, a digital property investment platform, will use the funds to build an integrated property investment service, improve data models, and make new hires, among others. 5️⃣ [East Ventures-backed fintech firm JiPay winds down]( Singapore-based JiPay, which was focused on serving domestic workers, said it was unable to generate enough remittance revenue in the city-state to raise funds and support expansion plans.  --------------------------------------------------------------- FYI [Atome cuts staff in Indonesia BNPL, P2P divisions]( This is the company’s second round of layoffs, following job cuts in Indonesia in late August.  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! 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