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Binary options trading has become a hot topic of discussion among Indonesian netizens over the past two weeks after dozens of people said they have fallen victim to scams.
In an official press release issued on Wednesday, Indonesia’s Commodity Futures Trading Regulatory Agency, or Bappebti, announced that 92 unlicensed binary options websites such as Binomo, IQ Option, and Olymp Trade have been blocked by the Indonesian government. According to Bappebti, binary options are a form of online gambling and are illegal in Indonesia.
According to the US Securities and Exchange Commission (SEC), binary options are financial instruments where the payouts are all or nothing, and depend on the outcome of a position during the option’s expiration. Typically, traders need to guess whether the price of a particular asset, such as a stock, foreign currency, or commodity, will rise above or fall below a defined level by a specified time. Traders who hold positions in binary options don’t have the right to buy, sell, or hold the underlying asset.
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Platforms such as Binomo and Olymp Trade have affiliate programs that benefit users or brokers if they bring new clients to the sites. An Indonesian influencer named Ichal Muhammad, who worked as an affiliate of one platform, said in a podcast that binary options sites lure amateur traders by promising the possibility of high returns.
Eight Binomo users filed a police report on Thursday, accusing the platform and its brokers of committing fraud. The police may open an investigation into platforms that offer binary options trading to identify how they work in tandem with affiliates to encourage user activity.
Based on data compiled by Indonesia’s Financial Services Authority (OJK), only 38% of the country’s population has the ability to understand and apply financial skills, including personal financial management. This means the general population is more susceptible to financial fraud. In fact, losses due to fraud that had been advertised as investment opportunities added up to IDR 117 trillion (USD 8.14 billion) over the past ten years, according to the OJK.
Besides binary options, there have been illegal fintech platforms involved in alleged scams in Indonesia over the past few years, including investment company Jouska and P2P lending app Tanijoy. Many amateur investors do not check the legality of a platform, particularly when there is an emphasis on the possibility of high returns. In addition, there are social media influencers, who have hundreds of thousands or even millions of followers, promoting unlicensed trading or investment sites.
“The government should block any shoddy financial websites and ads before people fall prey to scams,” Nailul Huda, a digital economy analyst at the Institute for Development of Economics and Finance (INDEF), told KrASIA. “The government must take legal action against fraudulent investment platforms that operate without a permit and those who promote said platforms.”
Huda hopes that the government will launch mandatory financial literacy programs at schools in view of increasing investor interest among younger Indonesians. “Gen Z looks for information on social media, which is often unreliable, so it is very important to integrate financial education into the school curriculum. Students need to learn about financial instruments so that they can make informed decisions later on,” said Huda.
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