Bank Indonesia's Digital Currency Can Counter Crypto: Expert

TheIndonesia.co - An economics expert positively welcomes Bank Indonesia’s plan to issue central bank digital currency, or CBDC, as it’s deemed the right countermove against cryptocurrency that has been growing very rapidly in the country.

Heru Gunawan, a member of House of Representatives Commission XI which oversees economic and financial affairs, said digital rupiah is a great breakthrough by the central bank amid crypto’s popularity.

“Digital rupiah is expected to stop the invasion of cryptocurrency which has been massively favored by the public,” Gunawan said in a statement on Monday, December 13.

He explained that based on Law No. 7/2021 on Currency, rupiah is the only legal payment instrument in Indonesia. Therefore, the use of crypto is simply illegal. The House member also reminded the public of the risks of crypto as an investment commodity because it’s without fundamentals and bears a potential of large fluctuations.

“Even though it’s illegal and of high risk, but a big number of people have crypto. It’s our collective responsibility to educate the public to avoid being the victims of crypto,” he said.

According to a study on financial stability released by Bank Indonesia (BI), in June 2021, there were about 6.5 million crypto investors, almost triple the total of investors in the stock market at only 2.4 million investors.

As reported, Indonesia’s central bank has been developing a plan to issue CBDC or digital rupiah. In November, BI Governor Perry Warjiyo said it can accelerate digitalization as well as support economic relief efforts as the digital payment system has become a necessity these days.

The central bank has also been studying the options to distribute the digital rupiah in Indonesia.

“BI has been exploring two approaches. The first one is directly or one-tier, or indirectly or two-tier,” assistant governor for macroprudential policy department at BI Juda Agung said in November.

According to him, in a one-tier approach, the public can directly get digital rupiah from BI, while in two-tier structure, it will be distributed to banks which will subsequently distribute it to public.

Agung added the issuance of digital rupiah is necessary to foster monetary sovereignty in Indonesia. This is because more digital transactions will help maintain the effectiveness of the central bank’s monetary policy, maintain financial stability, and encourage financial inclusion.