This company is investing on the bet that Indonesia will lift its ban on crypto payments in three years

Pundi X, a start-up that is looking to build an offline cryptocurrency sales network, has begun deploying its payment point-of-sales (POS) devices in Indonesia, betting that the central bank will renounce their current opposition against cryptocurrencies in as soon as three years.

The company, which wants to establish itself as the “Walmart or 7-Eleven of cryptocurrency”, said it has already received pre-orders for its POS device from Indonesia, and other countries such as South Korea, Japan, Singapore and Switzerland. The company targets to install up to 100,000 POS devices to build up its blockchain-connected payment network in Southeast Asia by 2021. A POS terminal is an electronic device used to process card or electronic payments at retail locations.

With the device, the start-up wants to enable the 80 per cent of the Indonesian population that are unbanked to start buying and selling cryptocurrencies such as ethereum, and bitcoin – whose prices are highly volatile and driven often by retail investors. The idea is for the cryptocurrencies to become a medium of daily exchange, where the virtual currencies can be used to buy necessities like bread and coffee in retail stores, cafes, convenience stores and shopping malls where merchants have installed the POS device.

Payment by cryptocurrency is forbidden in Indonesia. Still, David Ben Kay, Pundi X’s chief legal counsel, said the roll-out of the POS device would be based on the company’s own schedule and completed regardless of any regulatory development. That is because the device’s payment-by-cryptocurrency function is not the default payment option, and the device is capable of other payment options which are compliant with today’s regulations.

“The functionality for dealing in cryptocurrency is not automatic, it has to be activated when it is legally permissible in any jurisdiction that the POS is being deployed by the retail store owners,” Kay told the South China Morning Post. Other payment options that the POS can support also include payment through bank cards, mobile wallet such as Apple Pay, and the company’s existing pay-by-QR code mobile app called Pundi-Pundi.

Bank Indonesia in January reiterated its stance that virtual currencies, including bitcoin, are not recognised as legitimate payment instrument.

Unlike China, however, Indonesian regulators did not ban the trading of cryptocurrencies at exchanges. This means accounts holders can legally keep their cryptocurrencies at the exchanges and also convert into fiat currencies when needed, industry players said.

Still, Kay said it likely only a matter of time before Asian regulators will be more open towards cryptocurrencies.

Blockchain, which is the distributed ledger technology behind cryptocurrencies, has wide applications in many industries. Additionally, a few central banks, such as Sweden, are studying the idea of a government-backed virtual currency. These developments will in turn lead to broader acceptance by regulators in the region, he said.

Pundi X, with 40 employees, has chosen to debut its service in Indonesia due to it vast population of 262 million, and the fact the country remains predominately cash based. Some of the region’s economies, such as the Philippines, rely heavily on overseas remittances. There are already start-ups that offer bitcoin-based remittances services in the archipelago and Pundi X also plans to target the market.

The marketing materials accompanying Pundi X’s initial coin offering outlined a growth strategy spanning Southeast Asia within three years.

But given how cryptocurrencies such as bitcoin are volatile in terms of price, it remains to be seen how Indonesia’s unbanked population can be incentivised to make use of the virtual currency instead of more traditional banking services.