Abstract
Digital finance trading is a thriving market in Indonesia as an emerging country with enormous digital economy potency in the world. The increasing number of transactions in this market yields inevitable risks such as illegal trading, ponzi scheme, or binary option that may harm Indonesian investors as well as developers. Amid its huge potential in the future, this AI-based finance “trading robot” brings regulatory challenges since it may expose a gray area of the regulation. Study on this matter is limited. Therefore, this chapter introduces trading robot regulation in Indonesia based on narrative policy analysis approach through literature reviews, which highlights three domains of discussions: 1) the provider legality; 2) the technology specifications, and 3) the developer criteria.
TopIntroduction
Indonesia is globally known as an emerging country with huge potential of digital economy. In the e-Company SEA 2021 report mentions that it is expected that the country’s digital economy will reach 146 billion USD in 2025 and 330 billion USD in 2030 which the highest GMV value in the Southeast Asian region (Google et al., 2021). The digital finance investment in Indonesia also grows vigorously at least for the last two years. Crypto, specifically, appears to be the most progressive digital finance market with the number of investors reached up to 6.5 million in June 2021 or more than twofold stock exchange investors numbers which is 2.4 million (Bank Indonesia, 2021). This number continues to grow to 11 million investors by the end of 2021. In addition, the crypto transaction value grows robustly. Bitcoin value, for instance, grew 14 times from 4.1 billion USD in 2020 to a total of 59.83 billion USD in 2021 (Cointelegraph, 2022). The discourse of crypto as future payment instrument and the opening of crypto exchange as traditional stock exchange are circulating publicly. The existing trading robot in digital investment and trading platform provide new solution for economy recovery due to Covid-19 pandemic. Hence, it gains popularity so quickly among Indonesians.
The increasing number of transactions in this market appeals inevitable risks such as illegal trading, ponzi scheme or binary option that may harm Indonesian investors as well as developers. Ponzi scheme, particularly, is growing illegal fraud trading robot services that offers fantastic profits to collect money from investors for fake return (Dirgantara, 2022). Based on the Indonesian police report that the total loss due to ponzi scheme fraud reaches 5.9 trilion IDR (almost 400 million USD) (Kontan, 2022). Most of the victims were tempted by lucrative passive income. In 2021, the Ministry of Trade of the Republic of Indonesia blocked 1,222 illegal commodity future trading and illegal gambling websites that includes 92 binary option domains such as IQ option, Binomo, Olymptrade, Quotex (Kementerian Perdagangan, 2022). The discussions about robot trading on social media and news platforms are dominated by negative sentiments. Figure 1 shows summary of “robot trading” mention both on social media and non-social media platforms from 2nd June to 2nd July 2022. The highest engangement occurred in June 2022 with number of mentions was 50,213 times on social media and 1.6 million times on non-social media platforms.
Figure 1. Summary of “Robot Trading” mentions
Source: brand24 application Trading robot, or also known as expert advisor (EA), is an AI-based robotic system that installed in a specific trade platform (Dinata, 2018). It allows automatization in ruling the calculation (Abouloula et al., 2018). Nevertheless, it poses a challenge particulary the authority of digital currency for the transactions that remains unclear. Tuff (2020) argues that trading robots cannot be implemented automatization completely without human interference. As in traditional stock exchange mechanism, the role of human in this digital finance exchange is similar especially in giving adjustments that may influence the value dynamic that may occurred during external factors such as political situation or global economy trend. (Rio Christiawan, 2021)
Key Terms in this Chapter
Ponzi Scheme: Schemes to benefit from new members' money.
Digital Trading: Trading carried out using digital platform.
Expert Advisor: A software made to be able analyze trading charts and provide the best recommendations for traders.
Trading Robot: A software degigned with intelleigent algorithms for trading.
Artificial Intelligence: Intelligent programs created with certain algorithms in a software.
Ilegal Trading: Trading activities prohibited by regulations.