Securing the Cryptospace: The Urgent Need to Regulate the Cryptocurrencies

June 21, 2022 1:09 pm || By

Author: Irnasya Shafira
Editor: Anisa Pratita Mantovani

The creation of Bitcoin as the first decentralized peer-to-peer payment system has radicalized how our payment system works. It is considered a radical new way of making payments, leading to the creation of new and popular payment services known as cryptocurrencies. These digital currencies are neither created nor backed by any government, relying on purely market demands to maintain their value, and have been hypothesized as the ‘new money for the future’ by plenty of people.[i] Since Bitcoin’s first conception by an anonymous group of people collectively known as Satoshi Nakamoto in 2009, people thought that it was just another one of Internet’s fads, but since then Bitcoin has seen ups and downs throughout the years. Bitcoin, which was priced at 0 USD in 2009, is now priced at 30.693 USD at the time of this writing in 2022. In just two decades, the ‘passing Internet fad’ is now one of the most sought-out investments in the current era.[ii]

One of the reasons for cryptocurrencies’ meteoric rise in value is the economic carnage brought upon by the COVID-19 pandemic across the globe. Huge stimulus packages from governments worldwide and various central banks printing more money drove inflation and lowered people’s purchasing power. Thus, investments like Bitcoin, which governments did not back, were considered a store of value. Unless the protocol changes, the maximum number of existing Bitcoin is set at 21 million, and there are 18.5 million in circulation.[iii]

Although the cryptocurrencies seemed to be on the path of an unstoppable trajectory, they were still very much a mystery to everyone involved. Though financial advisors have included crypto investments in their client’s investment portfolios, they also noted the volatility of the market, which can see its dips and peak overnight.[iv] Other than the volatility of the currencies, people are also on the fence about the currencies’ nature. One of the most asked questions regarding cryptocurrency is whether or not they are a Ponzi scheme; crypto believers reject the accusation by citing the relative transparency of the currencies’ methods[v] and the absence of deception, while detractors say that the lack of underlying assets or government backing qualifies crypto for the Ponzi duck test.[vi]

Regardless of the ongoing debate, people are already involved in the cryptospace, and risks and crime will inevitably follow where people are. In this opportunity, this article would like to discuss one of the most significant crypto crash incidents, which has taken multiple human lives in its wake to highlight the urgent need for policing this entirely new space, namely the Terra Luna incident.

Terra network and its leader had risen to the highest tier of the crypto world thanks to many investors, big ones and small individual ones. The Terra Ecosystem was priced at 60 billion USD at its peak. However, on May 7, the then-priced 18 billion USD algorithmic stablecoin[vii] terraUSD (UST), which is supposed to maintain a $1 peg, started to wobble and fell to 35 cents on May 9. Its companion token, LUNA, which was meant to stabilize UST’s price, fell from $80 to a few cents by May 12.[viii] This crash has deeply affected the small individual investors who had put their life savings into the coins. So much so that there has been confirmation that eight people have committed suicide due to the incident, and the subforum on the topic of Terra Luna on Reddit plastered suicide hotlines for its users right on top.[ix] Analysts have tried to explain why the crash happened. Sugiono explains that LUNA’s crash happened due to the pegging of UST. The mechanism of the algorithmic stablecoin’s (in this case, the Terra Ecosystem) weakness is that when too many people redeem UST at once, a death spiral[x] may occur to LUNA, which functions as UST’s pair.[xi] Whereas Assuaibi explains that the reason why the incident occurs is due to the global uncertainty brought upon by the Russian invasion to Ukraine, which caused inflations in some parts of the world.[xii]

With literal lives lost due to the catastrophic crypto incident, this article argues that there should be some policing involved to secure people’s lives in the cryptospace. Nevertheless, this poses a massive question of how can the government, a centralized body, regulate a space created due to the creators’ distrust of said centralized body?

As regulations of cryptospace is still a debate in various governments, clear rules are still in development. Comply Advantage, a company based in North America, has compiled the current cryptocurrency regulations all over the world, which can be read in the picture below:[xiii]

From the article, it can be inferred that while most countries still have not considered cryptocurrencies as a legal tender, they do consider the crypto exchange as legal. However, the regulations vary from one country to the next. Most countries require cryptocurrency to attain a license from the government body for it to be a legal asset of each citizen. Most countries are also making cryptocurrency as part of their central banks’ currency project.

ndonesia does not consider cryptocurrency as a financial services product but a commodity under the Commodity Futures Trading Regulatory Agency (Pengawas Perdagangan Berjangka Komoditi—Bappebti). Thus Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan—OJK) bans any financial services such as banking, insurance, and multi-finance to use, marketing, or facilitate crypto assets. This means that crypto-assets (including cryptocurrencies) are allowed to be sold as a commodity, but they cannot be used as a payment device.[xiv] But this does not mean that Indonesians do not indulge in crypto trading, merely that Indonesians must convert the Indonesian Rupiahs (IDR) into their desired cryptocurrency to invest and redeem their cryptocurrency into IDR through exchange platform services such as Indodax and Zipmex to use their cryptocurrency.

Until January of 2022, 11.2 million users are engaging in the trade of crypto assets, and 90% are millennials aged 20-30. Jerry Sambuaga, Vice Minister of Trade, explained that the millennials are enthusiastic about crypto trades due to the limitless aspect of the transactions and the massive marketing done by various influencers.[xv] This enthusiasm brought upon myriads of crypto projects with varying degrees of success. For example, there is the ASIX token created by a public figure in Indonesia, LDX token, Toko Token, IDM Token, and Zipmex Token.[xvi] However, these tokens have not seen the resounding global success as those achieved by Terra LUNA, Ethereum, or other Bitcoins. This researcher believes these Indonesia-based tokens cannot achieve the resounding success of other tokens in the cryptospace because of the awkward position these tokens have. Because how are the investors supposed to believe these tokens will skyrocket in value when they only treat them as a commodity and not a legitimate currency?

However, this researcher believes that Indonesia’s high enthusiasm towards the Metaverse (highlighted by the government’s ambitious undertaking to create ‘the Indonesian version of Metaverse’ by the G20 Summit[xvii]) also meant that cryptocurrency, as a decentralized currency not under any government, has the potential to be a prevalent payment method in the Metaverse in the future. It is safe to say that with the current trajectory, Indonesia is at in regards to its ambition for a much more digitalized nation. Cryptocurrency will not be able to remain as a commodity. It will transform into a much-needed payment device in the Metaverse. And as with any other country, Indonesia will have to face the dilemma of creating a set of regulations to deal with crypto tradings—or a crypto governance.

With high enthusiasm towards cryptocurrency as an investment, coupled with a high-impact incident such as the crash of Terra LUNA, and the potential future of cryptocurrency being popular in the Metaverse highlights the urgent need to regulate cryptocurrencies as a suitable investment property in likeness to real estates and other financial investments. Indonesia has seen the rise of enthusiasm for other investments, such as stocks and mutual funds, which are relatively safe with various regulations. Though this researcher understands the leading spirit of cryptospace’s innovations unbound by any centralized figures, the Indonesian government should not just stop at listing the crypto assets allowed to be exchanged in Indonesia but also actively regulate the space to protect people from making highly volatile investments that bordered on gambling—especially since Indonesia, as a country, actively criminalize the act of gambling itself.

[i]               Oak, N. (2014). The rise of cryptocurrency [online]

[ii]              DeMatteo, M. (2022). Bitcoin Price History: 2009 to 2022 [online]

[iii]             Urquhart, A. (2021). Bitcoin: why the price has exploded – and where it goes from here [online]

[iv]             Ibid DeMatteo

[v]              Blockchain technology, which enables every crypto trading, is designed to be as public as possible by recording every transaction in the space. It is the base of the decentralized peer-to-peer system of crypto transactions. More on the blockchain technology can be read in the White Paper released by Satoshi Nakamoto here: and

[vi]             Zuckoff, M. (2022). Is cryptocurrency a Ponzi scheme? [online]

[vii]   A stablecoin is a type of cryptocurrency whose value is tied to an outside asset, such as the U.S. dollar or gold, to stabilize the price. It is considered one of the ‘safer’ investments in the cryptospace and is a popular choice for people who wants to invest in cryptocurrency but fears the extreme volatility of the usual coins. More on the stablecoins here:

[viii]           Sandor, K., Genç, E. (2022). The Fall of Terra: A Timeline of the Meteoric Rise and Crash of UST and LUNA [online]

[ix]             Olavia, L. (2022). 8 Orang Bunuh Diri Akibat Kripto Luna Anjlok ke Rp 1000 [online]

[x]     Death spiral debt describes a convertible bond that forces the creation of an ever-increasing number of shares, inevitably leading to a steep drop in the price of shares. In general, convertible debt is a bond that yields interest but also can be converted to several stock shares. It is a hybrid security with some attributes of both a bond and a stock. In the case of UST and LUNA, the algorithm of these two coins can be seen as the stock shares. Thus, the sudden redemption of UST stock shares at once lead to the steep drop in the LUNA’s stock prices. Read more on the death spiral here:

[xi]             Nabila, M. (2022). Ini Penyebab Crypto Terra Luna Anjlok, Death Spiral Hipotesis [online]

[xii]            CNN Indonesia. (2022). Analis Ungkap Penyebab Kripto Terra Luna Anjlok Parah [online]


[xiv]          Dewi, I. R. (2022). Biar Paham! Ini Aturan Uang Kripto di Indonesia [online]

[xv]           ANTARANews. (2022). Wamendag ungkap penyebab milenial antusias terhadap aset kripto [online]

[xvi]          Pratomo, G. Y. (2022). Selain Token ASIX, Ini Deretan Kripto yang Asli Buatan Indonesia [online]

[xvii]         Ramalan, S. (2022). Wow! Metaverse Versi Indonesia Bakal Dipamerkan di Presidensi G20 [online]