It is known that the Central Bank of Indonesia has adopted an aggressive attitude toward cryptocurrencies for some time. Since last year, it is asking people to refrain from using Bitcoin and other cryptocurrencies for domestic payments.
At the beginning of 2018, it went as far as banning fintech companies from using cryptocurrencies, following a previous ban on payment system providers. Nonetheless, it seems that this stance holds much more than the mere concern over the security and legality issues of cryptocurrencies and the risk of having digital currencies undermine the Indonesian rupiah. As a matter of fact, this decision may be hiding a deeper strategy-that of creating a national cryptocurrency.
Bank Indonesia is categorical against the use of existing cryptocurrencies
Bank Indonesia has demonstrated much concern regarding the use of cryptocurrencies. On various occasions, it has vehemently urged players in the payment industry from owning, selling and trading this type of digital currency. In a statement released earlier this year, Bank Indonesia highlighted the risks and “inherently speculative” nature of cryptocurrencies that care “prone to forming asset bubbles and tend to be used as a method for money laundering and terrorism funding”.
Another concern is the risk of strengthening a network that can inject life into other illicit activities such as prostitution and drug trafficking in a hassle-free manner. The central bank further added that cryptocurrencies can pave the way for financial instability in the country to the detriment of the citizens themselves. The Governor of Bank Indonesia, Agus Wartowardojo, also stressed that using cryptocurrencies as a payment and transaction instrument violates Law No. 7/2011 on currency, which stipulates that the Indonesian rupiah is the only official transaction and payment instrument in the country.
Bank Indonesia makes a strategic move
The severe position adopted by Bank Indonesia has lifted the veil on a clever strategy on its behalf. As a matter of fact, it is now planning to create a national cryptocurrency to position itself as a leader in the payment industry. Despite the fact that bitcoin trading volumes have always been low in the country and that daily transactions did not exceed $ 50,000, Indonesia seems to be betting on this form of digital currency to get a lion’s share in the payment industry: having a national cryptocurrency will not only give a kick to the local economy but will also position Indonesia as a ferocious competitor on the international scene.
Susiato Dewi, the executive director for payment systems of Indonesia Bank, explained that the national cryptocurrency can be used both for domestic and international transactions. The plan is, she underlined, to convert the existing physical banknotes, into digital money. “However, no country has released such money yet,” she pinpointed. According to her, the value of the digital Indonesian rupiah will be linked to the real assets of the Central Bank of Indonesia and will be defined by the national exchange rate and level of inflation. Indonesia plans to try the digital money this year itself.
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