One of the biggest theme of 2021 is definitely cryptocurrency.
With news of bitcoin, the largest cryptocurrency by market capitalisation hitting a high of US$65,000 per bitcoin back in April, along with new developments with non-fungible tokens (NFTs) and decentralised finance (DeFi), more people are getting acquainted with cryptocurrency.
To purchase cryptocurrency, one usually has to do so via an cryptocurrency exchange. Starting one is not easy, however.
On top of needing the liquidity, which refers to the ability to allow users to instantly buy and sell their cryptocurrency, you would also need to ensure that you fulfil the regulatory requirements of the country you operate in, especially in a country like Indonesia.
This is what makes the story of Tokocrypto such an interesting story to share. It is the first cryptocurrency exchange in Indonesia and is co-founded by 30-year-old Pang Xue Kai, who is a Singaporean.
Starting Tokocrypto was by chance for Kai.
Back in 2017, there was a phenomenon in the cryptocurrency prices called Kimchi Premium, where the price of cryptocurrency is sold higher at the Korean exchanges as compared to exchanges around the world.
A graduate of the National University of Singapore, Kai recognises that there is an opportunity to leverage on this arbitrage opportunity. He then started Tokocrypto in Indonesia so that investors can have access to better rates on its exchange.
We started off as a broker-style exchange, similar to Coinbase. We didn’t have an order book because we wanted to go to market fast, but were able to offer prices that are cheaper than what other exchanges were able to offer. To do that, we plugged into the global exchanges and are able to find cryptocurrencies trading at a cheaper rate.
– Pang Xue Kai, co-founder of Tokocrypto
We started off as a broker-style exchange, similar to Coinbase. We didn’t have an order book because we wanted to go to market fast, but were able to offer prices that are cheaper than what other exchanges were able to offer.
To do that, we plugged into the global exchanges and are able to find cryptocurrencies trading at a cheaper rate.
It was also possible to start an exchange in Indonesia as Kai had a “close working relationship” with regulators in Indonesia, paving the way for the successful rollout of Tokocrypto in Indonesia.
“While we are not the first cryptocurrency exchange in Indonesia, we are the first exchange to be regulated. We work very closely with the regulatory body — the Commodity Futures Trading Regulatory Agency — to set up the regulatory framework with regards to cryptocurrency exchange services,” Kai shared with Vulcan Post.
What started off as a cryptocurrency exchange providing futures trading and cryptocurrency custody services soon gained popularity as more Indonesians discover about their services.
Another achievement of the company is that the team managed to secure the backing of Binance, the largest cryptocurrency exchange in the world.
Tokocrypto’s journey with Binance started back in November 2019, when they registered as the first regulated cryptocurrency exchange in Indonesia. After receiving the “green light” to operate, the team was looking around to raise funds to grow its user base.
Tokocrypto then got in touch with various venture capitalists and cryptocurrency exchanges around the world to see who would be the partner that could push Tokocrypto to the next level.
Binance stood out among all the parties we reached out to because back then they were already the largest global exchange in the world, and it would be such a strategic partnership for us. For Binance, we were a fit for them because we are regulated and they are looking for a regulated local partner in Indonesia. – Pang Xue Kai, co-founder of Tokocrypto
Binance stood out among all the parties we reached out to because back then they were already the largest global exchange in the world, and it would be such a strategic partnership for us.
For Binance, we were a fit for them because we are regulated and they are looking for a regulated local partner in Indonesia.
Partnering with Binance meant that Tokocrypto is able to expand their product offerings to include the cryptocurrencies provided by Binance.
Beyond just that, Tokocrypto now also shares the same order book as Binance with a much higher liquidity, thus ensuring that its exchange is able to keep up with the high volume during volatile market movements.
An outcome of the backing of Binance is also the token offering of Tokocrypto’s native token TKO on the Binance platform. In May 2021, Tokocrypto became the first Southeast Asia company to launch its token offering on Binance, putting itself in front of millions of global investors around the world.
According to Tokocrypto, around 200,000 investors had participated in the Tokocrypto token offering.
The TKO token holders are able to use these tokens to have lower trading fees on Tokocrypto, and can be used on various Tokocrypto products in the works such as TKO Deposit, TKO Savings, TKO Cashback as well as the upcoming TKONFT Arcade, Tokocrypto’s NFT marketplace.
Naturally one question that came to mind was, how did Tokocrypto amass its success despite not being the first exchange in Indonesia? Moreover, it needed to compete with a dozen other cryptocurrency exchanges in Indonesia.
There are a few things that we really emphasised when we built Tokocrypto since day one. The first thing is regulatory compliance. We have a very strict compliance manual to ensure that we meet all regulatory requirements and this is something that the other exchanges have not actively complied to. This is also why we have a very close working relationship with the regulators. Secondly, in terms of information security, we have two ISO certification to ensure that its infrastructure has a strong foundation. I believe that there are only five companies in Indonesia that has ISO 27017 certification (information security in cloud computing) and we are one of them.– Pang Xue Kai, co-founder of Tokocrypto
There are a few things that we really emphasised when we built Tokocrypto since day one.
The first thing is regulatory compliance. We have a very strict compliance manual to ensure that we meet all regulatory requirements and this is something that the other exchanges have not actively complied to. This is also why we have a very close working relationship with the regulators.
Secondly, in terms of information security, we have two ISO certification to ensure that its infrastructure has a strong foundation. I believe that there are only five companies in Indonesia that has ISO 27017 certification (information security in cloud computing) and we are one of them.
“Aside from that, our partnership with Binance also makes us stand out in terms of liquidity and product offering. This is especially important because during large volume period, a lot of exchanges will go into maintenance mode, and this causes stress to users. For us, we are able to manage these large volumes because of our partnership with Binance,” Kai shared with Vulcan Post.
He also stressed that the banking channel is also a very important aspect when it comes to the success of an exchange.
When Tokocrypto first started, they made sure that they had reliable and commonly used fiat-onramp bank channels, so that their users can easily deposit their money via their bank account to their Tokocrypto virtual account instantly.
“The ability for users to instantly see their deposited fiat into their Tokocrypto virtual account was a big draw for users to use our service. This is something that other exchanges do not have yet as their users usually will only be able to check the status of their deposit a few days later,” he added.
Another topic which we spoke about was the difference in terms of Singapore’s cryptocurrency industry regulation versus Indonesia’s regulatory system.
According to Kai, the key difference between Singapore and Indonesia is that in Singapore, the cryptocurrency industry is loosely regulated via an exempt framework.
What it means is that Singapore companies looking to be involved in cryptocurrency will need to apply to be exempted from holding a licence under the Payment Services Act (“PS Act”) for the specific payment services for a specified period.
In Indonesia, Tokocrypto is actually registered under the local regulatory agency and is recognised by the government along with the financial system including the banks.
Because of these compliant measures, Tokocrypto is able to work with banks and payment gateways to provide a far smoother on-ramp (converting cash to digital currency) service as compared to the exchanges in Singapore.
Another key difference between Singapore and Indonesia is that Singapore is still very much a regulator-led push when it comes to moving the cryptocurrency industry, while Indonesia is very much business-led push. Due to this nature, Tokocrypto is able to move fast.
Indonesia is definitely emerging as a hotspot for crypto-centric businesses. The value of crypto asset trading in the country amounted to 64 trillion rupiah (US$4.44 billion) last year, and is growing steadily this year.
For Tokocrypto, they have more than one million registered users trading on their platform with an average daily volume of US$80 million to US$120 million. With over 100 employees, the company is already profitable and is considering listing its company on the public exchange.
In the interview, Kai also shared that they are looking at a public listing over the next two to three years. For now, the team is focusing on growing the business further, expanding our operations to more parts of Indonesia and and ensuring more mainstream cryptocurrency adoption in the country.
While Singapore is still home for Kai, it seems like he will be spending most of his time in Indonesia to build up Tokocrypto over the next few years.
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Featured Image Credit: Tokocrypto / Tek.id
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