Bank Indonesia (BI) plans to issue a legitimate currency in digital form which has been a discourse for a long time. The Central Bank Governor, Perry Warjiyo, said the design phase and distribution plan of the digital currency was under discussion. In that context, BI plans to issue a digital currency called Digital Rupiah, as a legal payment instrument in Indonesia.
In addition, the central bank also considers the digital currency technology that will be used, reflecting on the experiences of central banks in other countries, including the formulation of the platform to be used.
BI does this because it has the authority to issue legal tender in Indonesia according to the Constitution, which is spelled out in the Indonesian Banking Law and the Currency Law. However, the Governor admits that the use of digital currencies such as cryptocurrencies is already endemic nowadays.
According to him, consumers still like cryptocurrencies even though right now the instrument does not have adequate consumer protection, does not have a clear fundamental or regulatory basis and base only on mere speculations.
Meanwhile, Law Number 7 of 2011 concerning Currency, states that BI is given the task and authority to manage rupiah currency starting from the planning, printing, issuing, circulation, revocation and withdrawal stages, up to its destruction.
The management of Rupiah needs to be done well in supporting the maintenance of monetary stability, financial system stability, and the smooth running of the payment system.
Differences between Digital Currency and Rupiah
The issuance of the central bank currency digital or CBDC could make digital money Bank Indonesia could be a means of payment is legitimate.
Quoting their official Instagram statement @bank_indonesia, BI explained the difference between digital currency and rupiah and electronic money. Digital currency is a means of payment to be issued by Bank Indonesia. Meanwhile, electronic money is a payment instrument issued by the private sector or industry.
However, Rupiah is still a legal means of payment to conduct transactions in accordance with the law. These transcantions can be done in cash and non-cash.
The new digital currency will also have to be fortified with a firewall to avoid cyber attacks. The central bank will prepare the design and security system before the public can use digital currency.
Previously, BI Governor Perry Warjiyo said the issuance of the digital currency also took into account the implementation of monetary, macroprudential and payment system policies.
“Of course we are considering (to) support the implementation of monetary, macroprudential and payment system policies, including the preparation of money market infrastructure, foreign exchange and the financial sector,” Perry said.
In addition, the central bank is also considering the CBDC technology used in other countries. One of them is the choice of the platform.
For information, a number of countries are reviewing the issuance of digital currencies in the midst of the increasing popularity of cryptocurrencies such as Bitcoin. Some of the countries that are currently studying it include the UK, China, Japan, and the European Union.
What is Digital Rupiah
The digital currency item, which will be named Digital Rupiah, is a portrayal of advanced cash that is an image of state power or sovereign money gave by the national bank and is important for its financial commitments.
National bank advanced cash Digital Rupiah as computerized digital cash to be given and constrained by the national bank. Its inventory can be expanded or diminished by the national bank to accomplish financial objectives.
National bank advanced cash Digital Rupiah is not quite the same as electronic cash. Advanced Rupiah is a computerized one given by the national bank with the goal that it is the national bank’s commitment to the holder.
While electronic cash is an installment instrument gave by the private area or industry and is the commitment of the guarantor of the electronic cash to the holder.
Digital Rupiah is likewise not the same as digital currencies like Bitcoin. Where digital currencies are not directed by any controller and some are in restricted stock.
Adoption of Cryptocurrency in Other Countries
For information, a number of countries are reviewing the issuance of digital currencies in the midst of their increasing popularity cryptocurrencylike Bitcoins. Some of the countries that are currently studying include the UK, China, Japan, and the European Union.
Currently there are 2 central banks that are quite aggressive in encouraging the issuance of CBDCs, namely Sweden and China. In Sweden, the people of that country no longer want to use paper money, so the need for digital money, including cryptocurrencies, is very large.
However, Sweden is not in a hurry to issue its own cryptocurrency because it has a significant impact on the stability of its national financial system.
If Sweden are not careful in drafting this cryptocurrency concept , then it can cause significant disruption to the financial sector, especially in the financial sector, banking. Don’t let cryptocurrencies appear, people are lazy to save money in banks. They immediately put their money in the central bank.
Meanwhile, in China, where the digital ecosystem has grown tremendously, there is a conglomeration that even has a very broad business octopus with this digital money transaction business.
This trend is feared by the Chinese central bank because it will make the financial system controlled by the private sector, which can actually be difficult to control. So the central bank in China hastily discussed the formation of cryptocurrencies, because there is a sense of urgency to study the context of cryptocurrency use in China.
As for Indonesia, Erwin said that the current moter authority was still looking at the urgency and needs of the community. BI will continue to see that people need digital money in the form of crypto currency, or just enough digital money which is currently very widely used.
If there is a CBDC issuance, BI will continue to reanalyze its distribution for the retail segment or only for the interbank money market. “Because this cryptocurrency is full of technology issues, full of technical design issues, BI is also actively conducting research related to cryptocurrencies ,” he added.
Also read: How Do Bitcoin and Other Cryptocurrencies Work?
List of Crypto Assets Traders Companies in Indonesia
As of 2021, there are 13 companies that have obtained registration marks from CoFTRA as prospective physical traders of crypto assets. These companies are:
- PT Cipta Coin Digital,
- Upbit Exchange Indonesia,
- PT Pintu Kemana Saja,
- PT Cripto Indonesia Berkat,
- PT Tiga Inti Utama,
- PT Plutonext Digital Aset,
- PT Indonesia Digital Exchange,
- PT Zipmex Exchange Indonesia,
- PT Bursa Cripto Prima,
- PT Triniti Investama Berkat,
- PT Indodax Nasional Indonesia,
- PT Accountku Dotcom Indonesia, and
- PT Luno Indonesia Ltd,
The Commodity Futures Trading Supervisory Agency (CoFTRA) said daily transactions could reach Rp600 billion to Rp700 billion per day in 2019.
Bank Indonesia (BI) has finally outlined the rupiah digital currency or Central Bank Digital Currency (CBDC) that will be used in the future in financial transactions. BI said that at present Bank Indonesia is still defining the formation of a computerized cash or Central Bank Digital Currency (CBDC).
Bitcoin And Other Cryptocurrencies Will Not Become a Legal Payment Tool in Indonesia
Head of the Communications Department of Bank Indonesia (BI) Erwin Haryono asserted, so far, there is no strong reason to amend Law No. 7/2011 on Currency in order to accommodate the use of a legal currency in Indonesia other than the Rupiah. Including the use of cryptocurrencies such as Bitcoin and others.
“There is no urgency to change it (Law No. 7/2011) if then there is another currency that applies in this Republic,” he said in the Indonesian Perspective event, Saturday (8/5/2021).
Erwin explained, in Law No. 7/2011 concerning Currency itself, it is clear that the only legal tender in Indonesia is Rupiah. “So, in terms of payment, I think it’s very clear ,” he explained.
Also, recognizing currencies other than Rupiah as legal tender is considered to reduce the nation’s sovereignty. Following the decline in the credibility of the Rupiah as the original currency of Indonesia.
“Because Rupiah is a symbol of sovereignty (of the nation),” he said.
That way, hope has been dashed for the use of Bitcoin Cs as a legal means of payment in the country. Following the current regulations, it will strengthen the position of the Rupiah as a legal tender in Indonesia.
Because the law is very clear, it says that the only legal payment instrument is Rupiah.
Also read: Bitcoin is More Than Money
Why Cryptocurrencies Are Not Legal Payment in Indonesia
Bank Indonesia (BI) confirmed that crypto digital currencies such as Bitcoin and others are not legal tender in Indonesia. As regulated in Law No. 7/2011 concerning Currency.
“As the payment system authority (BI) very firmly says cryptocurrency in any form or other coins is not legal as a means of payment. There is already a law called the Currency Law,” said the Head of the Communications Department of Bank Indonesia ( BI) Erwin Haryono in the Indonesian Perspective event, Saturday (8/5/2021).
Erwin revealed, in Law No. 7/2011 concerning Currency itself, it only recognizes Rupiah as a legal tender in Indonesia. So, BI prohibits the use of other currencies because it is against the applicable regulations.
“It is very easy to make money in this currency only in Rupiah. With any currency like Bitcoin, or Dinar, which is also very expensive at the moment,” he said.
So that, said Erwin, not without reason BI prohibits the use of crypto digital currency as a means of payment in the country. Following the provisions on provisions that are threatened with dangerous risks that lurk the public.
“Like the value of money is very volatile, then there is no economic activity but steady income growth. It doesn’t make sense, if not, let alone,” he stopped loudly.
Also read: Bitcoin Hype And The Future Of Digital Currencies
When Will BI Release Digital Rupiah?
Bank Indonesia (BI) provides information on the rupiah digital currency or Central Bank Digital Currency (CBDC) that will be used in the future in financial transactions.
BI said at this time Bank Indonesia is currently formulating the creation of a digital currency or Central Bank Digital Currency (CBDC).
“So we will see the monetary conditions and the setting of digitalization that is being moved by Bank Indonesia,” composed BI in its authority clarification as cited on Monday (31/5/2021).
The item, which will be named Digital Rupiah, is a portrayal of computerized cash that is an image of state sway or sovereign money gave by the national bank and is important for its financial commitments.
National bank computerized cash Digital Rupiah as advanced cash to be given and constrained by the national bank. Its inventory can be expanded or diminished by the national bank to accomplish monetary objectives.
National bank advanced cash Digital Rupiah is not quite the same as electronic cash. Computerized Rupiah is an advanced one given by the national bank so it is a commitment of the national bank to its holder.
“While electronic cash is an installment instrument gave by the private area or industry and is the commitment of the guarantor of the electronic cash to the holder.
Digital Rupiah is likewise unique in relation to cryptographic forms of money like Bitcoin. Where cryptographic forms of money are not controlled by any controller and some are in restricted stock.
Then, rupiah is a legal means of payment to conduct transactions in accordance with the law (UU). This can be done in cash and non-cash.
Digital currency, continued BI, will have to be fortified with a firewall to avoid cyber attacks. The central bank will prepare the design and security system before the public can use digital currency.
Bank Indonesia Will Not Hastily Releases The Digital Currency
The Head of the BI Communications Department Erwin Haryono said that the Central Bank is currently still observing the development of the use of cryptocurrencies in the world and nationally.
Erwin said the central bank would not rush to issue the digital currency called the Central Bank Digital Currency (CBDC). The reason is because CBDC is a digital representation of money that is a symbol of state sovereignty or sovereign currency issued by the central bank and is part of its monetary obligations.
Currently, as is known, the central bank has monetary obligations in the form of currency (banknotes and coins) and checking accounts of third parties.
The Central Bank is currently still observing the development of the use of cryptocurrency in the world and nationally. In fact, over the last few years the preparation of regulations and special designs related to CBDCs has become increasingly intense.
“If the urgency is not there, we will still look at it from other countries. We do cooperate a lot with the central banks of other countries. However, as of now the urgency of the issuance is not that great,” he said.
Difference between Rupiah CBDC and electronic money
BI explained, Rupiah CBDC is digital money issued by the central bank. That is, there is an obligation of the central bank to the holder of the money.
Meanwhile, electronic money is a payment instrument issued by the private sector or industry. It is the issuer of the electronic money who will have obligations to the holder.
Until now, BI has confirmed that the legal currency for transactions in accordance with the law in the Republic of Indonesia is Rupiah. This applies to both cash and non-cash transactions.
Meanwhile, economists from the Center of Reform on Economics (CORE) assessed that BI should map out potential risks before releasing the CBDC. “Examining how much risk is behind this digital currency transaction, because I believe that people are still very ignorant about this digital currency,” he said when contacted last weekend.
In addition, the central bank is also considering the CBDC technology used in other countries. One of them is the form of the platform. Some experts has suggested that Indonesia adopting the blockchain technology.
Implementation of Blockchain Technology in Digital Rupiah
Indonesia is advised to apply blockchain technology in digital rupiah to improve the quality of financial governance and maintain state sovereignty.
The emergence of crypto assets or cryptocurrencies ( cryptocurrency ) and blockchain technology over the last decade, has brought new possibilities in the issuance and use of money as well as new forms of digital assets and attractive markets.
As the geopolitical, economic and social environment rapidly evolves, so does the need and new standards for secure, trustworthy and easy-to-use digital payments and means of exchange.
“One of them is a new standard that has recently begun to be aggressively applied in various countries, namely regarding Central Bank Digital Currency (CBDC),” said Gilang Bhagaskara, Director of Blocksphere Indonesia.
To accelerate CBDC adoption in Indonesia, recently Blocksphere Indonesia in partnership with Consensys reissued a review report on CBDC adoption entitled “Consensys Official Report: Central Bank and the Future of Digital Money”. The report can be downloaded here (source: blockchainmedia.id).
The report states that Indonesia is advised to implement digital rupiah in the context of Central Bank Digital Currency (CBDC).
“In addition to these two things, Indonesia has the potential to accelerate digital financial innovation by implementing a central bank digital currency ( CBDC ),” said Gilang Bhagasakara Director of Blocksphere Indonesia.
As an archipelagic country with a decentralized geography, Indonesia has challenges with data fragmentation in many sectors. It also includes the financial sector, payments and economic regulation.
With a CBDC with blockchain technology, Indonesia can accelerate the state financial business process, both in the retail sector, between banks, and between countries.
Innovation of financial products has also become concise and fast thanks to CBDC and can create new business models that are profitable for the country.
Also read: What To Expect From Future Blockchain Technology
What Will Be The Future of Digital Rupiah?
Rupiah CBDC is going to be a digital money representation that is a symbol of state sovereignty or sovereign currency issued by the central bank and is part of its monetary obligations. With a digital form of money, CBDCs will be issued and controlled by a central bank.
That way, the supply can be increased or decreased by BI to achieve economic goals.
Currently, BI still conducted a Rupiah CBDC study to see the potential and benefits of digital currency. The studies conducted include design, technology and risk mitigation.
In this assessment, Bank Indonesia coordinates with other central banks, including through international forums. This is done to further deepen the study of the issuance of digital currency or CBDC Rupiah.
The plan to issue Rupiah CBDC by BI is based on at least three considerations. The three things are: as a legal payment instrument in Indonesia, supporting the implementation of monetary policy, macroprudential and payment systems, and presenting a choice of technology-based payment instruments.
In this case, BI emphasizes that Rupiah CBDC needs to be fortified with a firewall to avoid cyber attacks that are preventive and also resolution. “Later on, the design and security system must be properly prepared before the digital Rupiah can be used by the public.”
Conclusion
Although the risk of digital currency is still gray, according to him, these considerations must be studied in depth by BI, including the risks that will arise from digital technology infrastructure. What risk can there be when a digital network in an area goes out, whether later the transaction value will be lost or how this must be prepared.
Therefore, it is suggested that Bank Indonesia strengthen its coordination with relevant stakeholders such as the Ministry of Communication and Information (Kominfo) and telecommunications operators to ensure equitable distribution of digital technology infrastructure.
BI, also needs to coordinate with the financial industry such as the Financial Services Authority (OJK) regarding digital currency supervision and the Ministry of Finance regarding the application of digital money.
In regards to their readiness to supervise, also BI must formulate the regulations that are need to be added. This mean the road to Digital Rupiah is a long one.
Also read: How Effective Are Cryptocurrencies As Digital Payment In The Future?
