Bank of Indonesia joins central bank digital currency race

After banning crypto payments back in 2017, Indonesia is looking to allow payments in a digital rupiah currency.

The Bank of Indonesia is one of the latest global central banks to announce state digital currency plans amid a major spike in the country’s digital payments.

Governor Perry Warjiyo said Tuesday that Indonesia’s central bank is planning to launch a digital rupiah currency as a legal payment instrument in Indonesia, Reuters reports.

The official noted that the rupiah is the only legally accepted currency for payment in the country so far, and BI will be looking to regulate a digital rupiah the same way it regulates cash and card-based transactions.

According to Warjiyo, BI is now studying potential benefits of a digital rupiah including its impact on monetary policy and payment systems, as well as evaluating the readiness of the financial infrastructure. The bank is also assessing potential technology options for building a central bank digital currency, he noted. Speaking at a streamed news conference, the official did not specify on an exact timeline for a digital rupiah development.

At the time of writing, BI has apparently not released an official statement regarding its CBDC plans. According to a notice on an official website of the bank, BI is about to decide on the issuance of a digital rupiah in the near future as necessary preparations have been completed. “BI is currently still focusing on digital transformation as part of Indonesia payment systems blueprint 2025,” the statement notes.

According to the report, Indonesia’s entrance to the global CBDC race comes in response to a major surge in digital banking, with digital transaction frequency jumping over 60% on an annual basis. Digital payments represent one of the country’s main policy priorities after Indonesia saw strong growth in online transactions during the COVID-19 pandemic.

The latest news follows Indonesian financial authorities announcing potential tax schemes for capital gains generated from crypto last week. Previously, Indonesia’s Commodity Futures Trade Regulatory Agency was also considering levying a tax on all cryptocurrency transactions taking place on domestic crypto exchanges.

Indonesia is known for its mixed approach to regulating crypto as the country put a blanket ban on cryptocurrency payments back in 2017 despite keeping crypto trading legal.