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Indonesia’s central bank marshals staff to enforce crypto payments ban

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The head of the Bank of Indonesia, Perry Warjiyo, announced the introduction of a ban on the use of cryptocurrency as a means of payment or other instruments of financial services. According to the head of the regulator, the ban is in line with current legislation, according to which digital assets don’t belong to legal means of payment.

“Cryptocurrency is not a legal payment instrument under the Constitution, Indonesia Banking Law and Currency Law”, Perry said.

To ensure compliance with the new ban, Bank of Indonesia will strengthen the work of supervisors, he added.

“We will send supervisors to ensure that financial institutions comply with the provisions set out in the currency law. We emphasize and ensure that cryptocurrency or Bitcoin doesn’t become legal tender. And we prohibit financial institutions from using them as a means of payment”, said Governor of the Bank of Indonesia Perry Warjiyo.

He made the announcement during a virtual seminar on June 15th. He also said that cryptocurrency wouldn’t be allowed for “other financial services instruments” either. Although it wasn’t explicitly stated what those instruments were.

Thus, the country is currently working to regulate cryptocurrencies. Stating that the digital asset market is giving rise to the development of illegal platforms.

At the same time, according to a study conducted in 2020 by Jump Capital, Indonesia was among the most promising countries for cryptocurrencies.

Indonesia and cryptocurrency

The use of cryptocurrency has become popular recently due to the dynamic value of this currency compared to investment products that existed in the past, despite the lack of consumer protection. Bank of Indonesia also known for its speculative nature, which discourages the use of cryptocurrency.

There are also reports suggesting that the central bank is planning to issue its own digital rupee. Which currently formulated as the Central Bank Digital Currency (CBDC).

The main reason for issuing CBDC is that the digital rupee will be issued and controlled by a sovereign state. The security aspect of this central bank of digital currency also developing, it will ensure the security of its system and its consumers.

Cryptocurrency regulation is in full swing

Some governments currently prohibit the use of cryptocurrency as a means of payment. Although they don’t prohibit the ownership of assets. This comes at a time when central bank digital currencies (CBDCs) are becoming the main focus of attention for governments and central banks looking to maintain sovereignty over legal tender.

El Salvador remains one of the notable exceptions. As President Nayib Bukele sent a bill to the country’s Congress to recognize its official currency. Since then, the bill passed and received a lot of enthusiastic responses, but the International Monetary Fund (IMF) finds this problematic from a legal and economic point of view.

Meanwhile, Indonesia prepares to develop its own CBDC with a focus on accelerating digital payments. It will join Canada, China, France, Japan and several other countries in this quest to modernize financial systems.

Global financial institutions like the Bank for International Settlements (BIS) have also issued cryptocurrency alerts in support of the CBDC. He called for global collaboration in the use of CBDC. Which is a new idea that will take time to fully implement.

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