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Bank of Indonesia joins central bank digital currency race

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The central bank of Indonesia plans to issue its own national digital currency (CBDC), writes Reuters with reference to the head of the regulator Perry Warjiyo.

This decision was made due to the fact that during the COVID-19 pandemic, the island nation of Indonesia experienced a significant boom in digital transactions. According to the Central Bank, in April the number of non-cash transactions in annual terms jumped by 60% to 570 million, and their volume by 46% – to 3.1 trillion rupees (~ $ 217.5 billion). Against this backdrop, the country plans to step up its wire transfer efforts by issuing a central bank digital currency.

The rupee is the only legally accepted currency for payment in Indonesia, and the country’s central bank will conduct the upcoming CBDC in the same way it handles banknotes and card transactions. Consequently, the digital rupee will gain legal tender status.

Now the Indonesian Central Bank is studying available platforms that they can use to create a digital rupee, which, according to Warjiyo, will become a full-fledged payment instrument along with fiat. The head of the Central Bank of Indonesia did not specify the exact timing of testing and launching CBDC.

Recall that for the first time the Bank of Indonesia announced plans to issue a digital rupee back in 2018.

Crypto-environment in Indonesia

At the moment, Indonesian law prohibits the use of cryptocurrency as a payment instrument, but trading in digital assets in the country allowed.

In addition, the largest economy in Southeast Asia has seen a dramatic increase in the number of crypto users in recent months following the recent growth of most digital assets. Indodax – the largest crypto exchange in Indonesia – has registered over 700,000 new members in the first four months of 2021. The total has increased to three million.

However, this month, the country’s officials are reviewing a plan to tax the trade of Bitcoin and all altcoins. A spokesman for the Indonesian tax office said future implementations are still under discussion. No changes have been made yet. In addition, he explained that taxation vital to the economy.

Most central banks in the world are studying issuing of their own digital currency

The Bank of Korea will begin testing the digital won in August 2021. The National Digital Currency (CBDC) health check will last until December 2021. The regulator is now looking for a technical partner to launch the digital won. Test participants will have access to payments, money transfers and deposits on mobile devices using the national digital currency.

China is the closest to issuing its own national digital currency. Employees of the largest Chinese retailer JD.com can already receive salaries in digital yuan.

The central bank of South Africa also recently announced that it has begun to study the potential of state-owned cryptocurrencies. The regulator will focus on how the possible launch of the digital South African rand will affect the country’s economy.

Central banks of other countries are also testing digital currencies in order to further contrast them with existing decentralized cryptocurrencies.

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