Indonesia Update

Background

There are several concurrent initiatives across Indonesia that include both ABX and Kinesis business lines. This update will focus on Kinesis.

The Kinesis business in Indonesia includes two major business verticals: Cross Border Value (the functional equivalent of International remittances) and Gold Savings/Payments Programs.

Kinesis has agreements and partnerships in place with PT POS (government post office), JFX (Jakarta Futures Exchange), KBI (government clearinghouse), NU (100 million members organisation), CIMB Bank, among others.

Cross Border Value (CBV)

There are approximately 6 million Indonesians working as migrant workers across several nations, with Malaysia, Saudi Arabia, United Arab Emirates, being the most prevalent (the official published number of migrant workers is much lower, due to there being both formal channels – those with working papers and informal channels – those without working papers).

Kinesis, together with its strategic partner, PT POS, has decided to commence with the Malaysia-Indonesia Corridor, which includes 3 million migrant workers (both formal and informal) sending almost US$1 billion from Malaysia to Indonesia each month.

Update

1. PT POS agreed as strategic point entity for all incoming CBV from all international jurisdictions. Complete.

2. International payments and remittances require special licensing in both the sending and receiving countries, this is a capital intensive and long approval process endeavour. The Kinesis CBV (as opposed to remittances) is a purchase of KAU (gold) in the host country, sending KAU via Kinesis Blockchain Network (KBN) and selling KAU in receiving country.

   In consultation with PT POS and relevant Indonesian ministry, this puts us on a firm footing that we are transferring a commodity cross border and thus are not subject to Remittance/International Payments licensing requirements. Complete.

3. In order to facilitate cooperation with PT POS, as well as compliance with their directives, including fiat on-ramps, off-ramps, commission, fees, etc., Kinesis formed a new corporate entity with offices in Jakarta – PT Kinesis Monetary Indonesia (PT KMI). PT KMI has also been able to open multi-currency bank accounts with a major Pan-Asian bank. Complete.

4. Kinesis, together with PT POS and local technology partner, PT Bullion Ecosystem International, have developed a mobile platform – PosGO. PosGO includes a CBV integration, as well as relevant KAU pricing. The PosGO platform will go live in January 2020, with an official launch to be dedicated by the Vice President of Indonesia, together with the National Committee of Sharia Finance. Projected January 2020.

5. Working with a United Nations-backed initiative, together with the Indonesian Ministry of Manpower, Kinesis has presented a working paper – The Indonesian Migrant Worker Enhanced Communications and Protection Program; whereby a zero/low cost “hotline” type communications element, facilitated thru PT POS, which will connect migrant workers directly with family members, local Indonesia Embassies and Ministry of Manpower to foster a safer and more efficient migrant worker experience, including working conditions, living conditions, abuse allegations, travel and transfer related services. Naturally, as PT POS will be the conduit for each and every migrant worker through this program and therefore PT POS clients, they will be natural participants in the PT POS/Kinesis CBV products and services. Projected Q1 2020.

6. Facilitating CBV within the Malaysia–Indonesia Corridor requires an organisation and apparatus within Malaysia. Kinesis is working on two partnership fronts simultaneously: Malay POS for the formal channel (1 million having working papers) and a large Indonesian Retailer with outlets across Malaysia for the informal channel (2 million without working papers). Projected Q1 2020.

7. CBV Phase 2. Upon successful implementation of above, Kinesis will work with PT POS and other partners to a) facilitate CBV in other jurisdictions: Saudi/UAE and b) implement “Smart ATMs” across both sending and receiving points for Kinesis integrated and automated fiat deposit, KMS transactions and fiat receipt. Projected: Q2-Q3 2020.

Gold Savings/Payments Programs

The benefits of the KMS for gold savings and payments programs are well established for both users (Holder/Depositor Yield revenue share) and corporate/government facilitators (Referral Yield revenue share). In Indonesia, both consumer demand and existing Kinesis partnerships with commercial and government entities are highly engaged with Kinesis on promoting these products and services on a national level.

There are, however, challenges. Recently enacted law and regulation require all gold traded via exchange, online or by other technology means (read blockchain) that gold holdings must be held in Indonesia. Kinesis has been active in creating an environment to offer its products and services to this business vertical.

Update

1. Kinesis has embarked on building and operating the first and only purpose-built, high-security bullion vault in Indonesia together with commercial and government partners and shareholders. Agreements between Kinesis and vault project partners: OZL, PT POS, NU, JFX and KBI have been executed. Complete.

2. Kinesis and its government partners have worked with the regulators for a work-around until the Indonesian vault facility is operational. Kinesis has been successful in getting an exemption from the law, to utilize the ABX Singapore Vaulting Hub until the vault is operational. Complete.

3. The design, build and staffing of the vault facility is projected as 9-12 months from construction commencement. Projected Q1 2021.

4. The PosGO app, which will facilitate numerous investment and payments applications including gold investment, as well as the desktop version – PosGold, will go live in January 2020. The PosGO app will be mandatory for all 45,000 PT POS employees as a starting point. Projected January 2020.

5. PT POS, together with its mobile app partner, has agreed to a full API integration with KMS for PosGO. Projected Q1 2020.

6. NU has agreed to integrate KAU onto their ASEAN-wide mobile app, for the benefit of their 100 million members and affiliates across ASEAN countries. A Project Integration Roadmap is scheduled for completion Dec 2020. Projected Q1-Q2 2020.

7. Government clearinghouse, KBI, has agreed and signed an agreement to act as a digital asset custodial agent at the new Vault Facility. Complete.

8. Technical/Operational Decisions. Notwithstanding the above, there are still remaining hurdles. Currently, KAU, when executed on KBE, is priced against an automated algorithm, which finds the best price across all ABX Vaulting Hubs (New York, London, Zurich, Liechtenstein, Dubai, Hong Kong, Singapore, Sydney). As the current law (and temporary exemption) calls for any Indonesian participants to hold gold in Singapore (temporarily) and Indonesia (thereafter), a technical solution or hybrid product must be developed. This is an internal work in progress to ensure the best outcomes for Indonesia and the KMS at large. Projected Q1 2020.

Note: CBV is not affected by this as KAU is bought and sold on the same day and thus no domestic holdings are required.