Bank Indonesia to Evaluate CBDC Influence to Local Economy

Doni Primanto Joewono, the Bank Indonesia (BI) Governor, said cryptocurrency can facilitate financial system efficiencies and inclusion. The administration is evaluating the impact of adopting central bank digital currency (CBDC).

Speaking at a side event of the G20 summit, Joewono noted that the growth of crypto assets spurred by digitization in the post-pandemic era has transformed general life and people’s activities. 

These transformations, therefore, pursue central banks to explore the issuance of CBDCs. Joewono said “a number of central banks are carefully continuing to study the possible effects of the CBDC, including Indonesia.”

The governor also stipulated that a regulatory framework is crucial for the stability of crypto assets. He pointed out:

“Crypto assets can potentially help emerge new risks that could affect economic, monetary, and financial system stability.”

As part of the CBDC feasibility study, Bank Indonesia plans to offer a white paper concerning establishing the digital Rupiah.

This seems to be a change of tune based on Indonesia’s previous tough stance on the crypto sector. Previously, the national Financial Services Authority (OJK) asserted that financial firms should not offer cryptocurrency services. OJK had stated:

“OJK has strictly prohibited financial service institutions from using, marketing, and/or facilitating crypto asset trading.” 

Once rolled out CBDC, the digital currency is expected to drive the financial inclusion of nearly 1.7 billion people left out of the banking system. 

CBDCs are digital assets, pegged to a real-world asset and backed by the central banks, meaning that they represent a claim against the bank, precisely the way banknotes work. Central banks will also be in complete control of their currency supply. 

Image source: Shutterstock


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Indonesia’s central bank marshals staff to enforce crypto payments ban

Indonesia’s central bank governor, Perry Warjiyo, is mobilizing official supervisors to enforce the country’s ban on financial institutions using crypto assets as a means of payment.

During a virtual seminar on Tuesday, June 15, Warjiyo reiterated that local financial firms and payment provided are prohibited from facilitating the use of cryptocurrency to settle payments or as an instrument used in other financial services.

The central bank governor emphasized that crypto assets are “not legitimate payment instruments under the constitution, Bank Indonesia Law, and Currency Law,” noting that field supervisors will be sent out to ensure that local financial institutions adhere to the policy.

Bank Indonesia prohibited financial institutions from using crypto for payments in late 2017, with the central bank halting payment processors from using cryptocurrency to settle transactions the previous year.

Despite the central bank’s prohibition of crypto for payments and its early 2018 warnings against virtual currency, Indonesia’s Commodity Futures Trading Regulatory Agency issued regulations in February 2019 that legitimized cryptocurrencies as speculative commodities and paved the way for cryptocurrency derivatives to be traded on local stock exchanges.

The guidelines provided a legal framework for “the trading of crypto assets as commodities that could become the subject of futures contracts and other derivative contracts traded in the stock market.”

Warjiyo’s warning emphasizing the ban comes just weeks after he announced Bank Indonesia is working on a central bank digital currency (CBDC). The CBDC was announced on May 25, with Bank Indonesia noting the use of digital payments had increased 60.3% year-over-year as of April, with total settlement value up 46% to tag $217.4 billion.

On May 30, the central bank provided more details on the CBDC via Instagram, stating that a state-backed digital currency aligns with its policy of digitization initiative and advances its overall monetary objectives.

According to the Bank for International Settlements, central banks representing 20% of the globe’s population are expected to launch CBDCs within the next three years.