According to local media reports, the head of the Central Bank of Indonesia, Perry Varjiyo, announced at a virtual seminar that it would prohibit Indonesian financial institutions from using cryptocurrency as a means of payment or other instruments of financial services.

According to Perry, the ban is based on existing laws:

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

He also explained that to ensure that financial institutions comply with this policy, the central bank is mobilizing supervisors in the regions.

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 Indonesia is 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 is currently being formulated as the Central Bank Digital Currency (CBDC).

“This will be an oversight of the economic health and context of digitization that is being promoted by Bank Indonesia,” the central bank's official Instagram account said.

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 is also being developed, which will ensure the security of its system and its consumers.

Cryptocurrency regulation is in full swing now

Some governments currently prohibit the use of cryptocurrency as a means of payment, although they do not 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 Nayyib Bukele sent a bill to the country's Congress to recognize its official currency. Since then, the bill has been passed and has 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. She 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.