Bank Indonesia to Issue Its Own CBDC to ‘Fight’ Cryptocurrencies

  • The Indonesian government would like to regulate digital assets, but the Islamic authority opposes crypto operations, seeing them as harmful.
  • The introduction of a central bank digital currency (CBDC) seeks to curb the growing adoption of cryptocurrencies in Indonesia.
  • Indonesia plans to create its own crypto exchange before the end of the year.

Following the Indonesian Islamic authority’s decision to ban all cryptocurrency operations, the Indonesian central bank has made plans to issue a digital rupee to “fight” private cryptocurrencies, a senior bank official stated.

Central bank Assistant Governor Juda Agung explained on Tuesday, November 30th, that crypto assets are currently traded alongside commodity futures, which are regulated by the commerce ministry.

Cryptocurrency trading has a high impact on the Indonesian financial system, Agung said while speaking in parliament, where he appeared to be evaluated for appointment as deputy governor of the bank.

"A CBDC would be one of the tools to fight crypto,"

the official stated. Since the beginning of the year, Bank Indonesia has been analyzing a project to create a central bank digital currency (CBDC).

“We assume that people would find CBDC more credible than crypto. CBDC would be part of an effort to address the use of crypto in financial transactions,"

argued Agung.

Bank Indonesia had already taken a radical stance against cryptocurrencies before, judging digital currencies to not be viable as a legal tender. The issuing body had thus urged buyers and sellers not to own, sell, or trade them.

On The Flipside

  • Millions of Indonesians have funds invested in cryptocurrencies. Hence, the central bank is acting  with caution to prevent a financial crisis from being unleashed.
  • The Ulema National Council (MUI in Indonesian), the community of Islamic and Sharia scholars, recently issued a resolution banning cryptocurrencies.

Religious academics consider crypto assets to be “haram” (prohibited), claiming that they create uncertainty and harm, and are good for gambling. The Islamic Council is the body that enforces Sharia in Indonesia, where the largest Muslim community in the world lives.

For its part, earlier this year the Indonesian government had announced plans to create its own crypto exchange before the end of 2021. The purpose being to monitor all cryptocurrency transactions that take place in the country. 

The government would prefer to regulate cryptocurrencies, rather than ban them in the manner China did, but Islamic authorities are opposed to the trade of crypto-asset.

Why You Should Care?

  • As of July this year, some 7.4 million Indonesians, of the 270 million who live there, had invested in cryptocurrencies, double the amount recorded in 2020.
  • According to data from the Ministry of Commerce, the value of transactions saw an increase, rising to 478.5 trillion rupees, or $33 ​​billion USD.


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