News

(Jakarta) – The Indonesian government should suspend and substantially revise a regulation on online content to meet international human rights standards, Human Rights Watch said in a May 17, 2021 letter to Indonesia’s minister of communication and information technology.

Ministerial Regulation 5 (MR5), which came into force in November 2020 with little consultation, requires all private digital services and platforms to register with the Ministry of Communication and Information Technology and agree to provide access to their systems and data as specified in the regulation. Those that fail to register by May 24 will be blocked in Indonesia. The minister should suspend the regulation before this deadline.

“Ministerial Regulation 5 is a tool for censorship that imposes unrealistic burdens on the many digital services and platforms that are used in Indonesia,” said Linda Lakhdhir, Asia legal advisor at Human Rights Watch. “It poses serious risks to the privacy, freedom of speech, and access to information of Indonesian internet users.”

MR5 governs all private “electronic systems operators” that are accessible in Indonesia, broadly defined to include social media and other content-sharing platforms, digital marketplaces, search engines, financial services, data processing services, and communications services providing messaging or video calls and games. The new regulation will affect national and regional digital services and platforms, as well as multinational companies like Google, Facebook, Twitter, and TikTok.

These companies are required to “ensure” that their platform does not contain or facilitate the distribution of “prohibited content,” which implies that they have an obligation to monitor content. Failure to do so can lead to blocking of the entire platform. The regulation’s requirement the companies proactively monitor or filter content is both inconsistent with the right to privacy and likely to amount to prepublication censorship, Human Rights Watch said.

The regulation’s definition of prohibited content is extremely broad, including not only content in violation of Indonesia’s already overly broad laws restricting speech, but also any material “causing public unrest or public disorder” or information on how to provide access to, or actually providing access to, prohibited material. The latter includes Virtual Private Networks, which allow a user access to blocked content but are also routinely used by businesses and individuals to ensure privacy for legal activities.

For “urgent” requests, the regulation requires the company to take down content within four hours. For all other prohibited content, they must do so within 24 hours of being notified by the ministry. If they fail to do so, regulators can block the service or, in the case of service providers that facilitate user-generated content, impose substantial fines.

The time allocated for response is unrealistically short, particularly for companies that work in multiple time zones, and will impose onerous burdens on smaller companies with limited staff. Unreasonably short time frames for removing content would most likely lead service providers to pre-emptively take down content to ensure compliance and could force the shutdown of smaller providers that do not have adequate staff available to respond to such requests, Human Rights Watch said.

The regulation appears to provide no mechanism for either the company or the person who posted the content to challenge the ministry’s order, either before or after the content is taken down. The lack of procedural safeguards and channels to appeal decisions only exacerbates the risk that regulators will abuse the provisions for taking down content.
Under the regulation, companies must also provide access to both their “systems” and their “data” for “supervision” purposes whenever requested to do so by the authorities. Companies must also allow law enforcement authorities to access electronic data for criminal investigations into any offense carrying a penalty of at least two years in prison. Requirements that authorities be given direct access to systems or massive amounts of information collected and stored by private companies are of serious concern. Such requirements are particularly prone to abuse, tend to circumvent key procedural safeguards, and can easily exceed the limits of what can be considered necessary and proportionate, Human Rights Watch said.

To facilitate access requests, the regulation requires each company to appoint a local contact person to receive and act on those requests. A company that fails to provide access for regulators and law enforcement faces penalties ranging from a written warning to revocation of their registration. The requirement to appoint a local contact person in Indonesia will make companies much more susceptible to pressure to comply with overbroad requests to remove content, and will inevitably lead to an increase in unnecessary censorship and compromise people’s privacy and their right of access to information.

“MR5 is a human rights disaster that will devastate freedom of expression in Indonesia, and should not be used in its current form,” Lakhdhir said. “The Indonesian government should immediately suspend the regulation, and start a consultation process with stakeholders and civil society groups based on the premise that any new or revised regulation must comply with international standards for privacy and free expression.”

The price of Bitcoin fell as much as 29% Wednesday after the China Banking Association warned member banks of risks associated with digital currencies. Other digital currencies suffered sharp declines as well.

Bitcoin’s volatility was on full display: The decline had narrowed to below 10% in early afternoon trading. Bitcoin has lost about 40% of its value since April 13 when it hit a high of more than $64,606 per coin.

Before Wednesday, Tesla’s decision to not accept the digital currency as payment for cars, along with concerns about tighter regulation of digital currencies, were major factors in the decline. The price is still up about 31% in 2021 and nearly 300% from a year ago.

Here’s a look at Bitcoin and digital currencies in general:

What happened to the price?
On Wednesday, a statement posted on the Chinese Banking Association’s website said financial institutions should “resolutely refrain” from providing services using digital currencies because of their volatility.

Virtually every cryptocurrency fell after the industry group’s statement. Bitcoin slumped to $30,202 before recovering to $38,038, down 12% on the day, according to Coindesk. Most cryptocurrencies lost between 7% and 22% of their value and shares of Coinbase dropped 5.4%.

The value of Bitcoin can change by thousands of dollars in a short time period. On the last trading day of 2020, Bitcoin closed just under $30,000. In mid-April, it flirted with $65,000. The price bounced around after that, with some notable swings, before taking a decidedly negative turn last week.

How Bitcoin works
Bitcoin is a digital currency that is not tied to a bank or government and allows users to spend money anonymously. The coins are created by users who “mine” them by lending computing power to verify other users’ transactions. They receive Bitcoins in exchange. The coins also can be bought and sold on exchanges with U.S. dollars and other currencies. Some businesses take Bitcoin as payment, and a number of financial institutions allow it in their clients’ portfolios, but overall mainstream acceptance is still limited.

Bitcoins are basically lines of computer code that are digitally signed each time they travel from one owner to the next. Transactions can be made anonymously, making the currency popular with libertarians as well as tech enthusiasts, speculators — and criminals.

Bitcoins have to be stored in a digital wallet, either online through an exchange like Coinbase, or offline on a hard drive using specialized software. According to Coinbase, there are about 18.7 million Bitcoins in circulation and only 21 million will ever exist. The reason for that is unclear, and where all the Bitcoins are is anyone’s guess.

Doesn’t Elon Musk have a role here?
Yes, and a fairly big one. Musk announced in February that his electric car company Tesla had invested $1.5 billion in Bitcoin. In March, Tesla began accepting Bitcoin as payment. Those actions contributed to the run-up in Bitcoin’s price, and Musk also promoted the digital currency Dogecoin, which also spiked in value.

However, Musk reversed course in just a short time, saying last week that Tesla would stop accepting Bitcoin because of the potential environmental damage that can result from Bitcoin mining. The announcement sent Bitcoin falling below $50,000 and set the tone for the big pullback in most cryptocurrencies.

A number of Bitcoin fans pushed back on Musk’s reasoning. Fellow billionaire Mark Cuban said that gold mining is much more damaging to the environment than the mining of Bitcoin.

A 2019 study by the Technical University of Munich and the Massachusetts Institute of Technology found that the Bitcoin network generates an amount of CO2 similar to a large Western city or an entire developing country like Sri Lanka. But a University of Cambridge study last year estimated that on average, 39% of “proof-of-work” crypto mining was powered by renewable energy, primarily hydroelectric energy.

But some companies are using Bitcoin?
The digital payment company Square and its CEO Jack Dorsey — also the CEO of Twitter — have been big proponents of Bitcoin. Overstock.com also accepts Bitcoin, and in February, BNY Mellon, the oldest bank in the U.S., said it would include digital currencies in the services it provides to clients. And Mastercard said it would start supporting “select crypto currencies” on its network.

Bitcoin has become popular enough that more than 300,000 transactions typically occur in an average day, according to Bitcoin wallet site blockchain.info. Still, its popularity is low compared with cash and credit cards.

There is skepticism around Bitcoin?
Yes, plenty of it. Tracking Bitcoin’s price is obviously easier than trying to figure out its value, which is why so many institutions, experts and traders are skeptical about it and cryptocurrency in general. Digital currencies were seen as replacements for paper money, but that hasn’t happened so far.

Federal Reserve Chair Jerome Powell has said the central bank prefers to call crypto coins “crypto assets,” because their volatility undermines their ability to store value, a basic function of a currency.

While some banks and financial services companies are getting in on it, others are staying away.

Could a digital currency selloff cause broader economic damage?
Regulators aren’t very worried about a possible crash in digital currencies dragging down the rest of the financial system or economy.

Even with the recent sell-off, digital currencies have a market value of about $1.5 trillion, according to the website coinmarketcap.com. But that pales compared with the $46.9 trillion stock market, $41.3 trillion residential real estate market and nearly $21 trillion Treasury market at the start of the year.

The European Central Bank said Wednesday that the risk of cryptocurrencies affecting the financial system’s stability looks “limited at present.” In large part, that’s because they’re still not widely used for payments and institutions under its purview still have little exposure to crypto-linked instruments.

Earlier this month, the Federal Reserve said a survey of market contacts found roughly one in five cited cryptocurrencies as a potential shock to the system over the next 12 to 18 months. That’s a turnaround from the fall, when a similar survey found none mentioning cryptocurrencies.

How much oversight is there?
Washington officials have been talking about regulating digital currencies more, and worries about a heavier hand have played a role in the recent swoon in prices.

Gary Gensler, who took over as chairman of the Securities and Exchange Commission last month, has said that cryptocurrency markets would benefit from more oversight to protect investors.

In a hearing before the House’s financial services committee earlier this month, Gensler said neither the SEC nor the Commodity Futures Trading Commission, which he used to head, has a “regulatory framework” for trading on cryptocurrency exchanges yet. He said he thought Congress would ultimately have to address it because “there’s really not protection against fraud or manipulation.”

How Bitcoin came to be
It’s a mystery. Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto. Bitcoin was then adopted by a small clutch of enthusiasts. Nakamoto dropped off the map as bitcoin began to attract widespread attention. But proponents say that doesn’t matter: The currency obeys its own internal logic.

In 2016, An Australian entrepreneur stepped forward and claimed to be the founder of Bitcoin, only to say days later that he did not “have the courage” to publish proof that he is. No one has claimed credit for the currency since.

Ride-hailing giant Gojek and marketplace Tokopedia, Indonesia’s two biggest startups, said on Monday they have combined their businesses to form GoTo Group, the largest technology group in the Southeast Asian nation, the fourth most populous country that is currently navigating to contain the economic fallout from the coronavirus pandemic.

GoTo will be preparing for a dual listing — in New York and Jakarta — later this year, executives said. Gojek’s Andre Soelistyo will lead the combined business as GoTo Group CEO, with Tokopedia’s Patrick Cao serving as GoTo Group President. Kevin Aluwi will continue as CEO of Gojek and William Tanuwijaya will remain CEO of Tokopedia, the two firms said in a joint announcement.

The combined entity is “a globally unique and highly complementary ecosystem,” the two firms said as they look to better compete with heavily funded super app Grab and e-commerce platform Shopee. GoTo executives claimed that the combined entity features:

Total Group Gross Transaction Value (GTV) of over $22 billion in 2020

• Over 1.8 billion transactions in 2020
• Total registered driver fleet of over two million as of December 2020
• Over 11 million merchant partners as of December 2020
• Over 100 million monthly active users (MAU)
• An ecosystem that encompasses 2% of Indonesia’s GDP

The deal, which has been in the works for several months, comes after Gojek spent several quarters exploring a merger with Grab. Tokopedia, meanwhile, was in talks late last year to pursue a public listing this year. Gojek and Tokopedia began talking earlier this year and last month moved to seek approval from their respective investors. During their talks, the proposed valuation of GoTo was $18 billion.

The companies, which have together raised about $8.2 billion over the years (according to research firm Tracxn), didn’t comment on the final valuation Monday nor did they disclose any other financial terms of the deal.

The friendship of Gojek and Tokopedia founders may have helped close this deal. The two companies first began working together in 2015 to accelerate e-commerce deliveries using Gojek’s local network of drivers.

“The companies will continue to thrive and coexist as stand-alone brands within the strengthened ecosystem,” they said on Monday.

In the meantime, Grab has since announced plans to go public in the U.S. via SPAC, and is seeking a valuation of $40 billion, which if materializes at the current terms, would be the biggest-ever deal of its kind.

“Today is a truly historic day as we mark the beginning of GoTo and the next phase of growth for Gojek, Tokopedia and GoTo Financial. Gojek drivers will deliver even more Tokopedia packages, merchant partners of all sizes will benefit from strengthened business solutions and we will use our combined scale to increase financial inclusion in an emerging region with untapped growth potential. For the consumer, GoTo Group will continue to reduce frictions and provide best in class delivery of goods and services. This is the next step of an exciting journey and I am humbled and proud to lead the GoTo movement,” said Andre Soelistyo, CEO of GoTo Group, in a statement.

Existing investors — including Alibaba Group, Astra International, BlackRock, Capital Group, DST, Facebook and PayPal, Google, JD.com, KKR, Northstar, Pacific Century Group, Provident, Sequoia Capital India, SoftBank Vision Fund 1, Telkomsel, Temasek, Tencent, Visa and Warburg Pincus — backed the merger, the two firms said.

Tokopedia’s Co-founder and CEO William Tanuwijaya said, “The establishment of GoTo Group proves that you can believe in an ‘Indonesian dream’ and make it a reality. Our goal has always been to build a company that creates social impact at scale, levelling the playing field for small businesses and giving consumers equal access to goods and services across the country. In addition to accelerating the growth of Indonesia’s digital economy, GoTo Group will make it easier for people from all walks of life to access quality products and services, anytime and anywhere. We still have a long way to go to achieve our goals, but today is about starting that journey together.”