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

0

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

Indonesia’s central bank governor, Perry Warjiyo, is mobilizing official supervisors to enforce the country’s ban on financial institutions using crypto assets as a means of payment.

During a virtual seminar on Tuesday, June 15, Warjiyo reiterated that local financial firms and payment provided are prohibited from facilitating the use of cryptocurrency to settle payments or as an instrument used in other financial services.

The central bank governor emphasized that crypto assets are “not legitimate payment instruments under the constitution, Bank Indonesia Law, and Currency Law,” noting that field supervisors will be sent out to ensure that local financial institutions adhere to the policy.

Bank Indonesia prohibited financial institutions from using crypto for payments in late 2017, with the central bank halting payment processors from using cryptocurrency to settle transactions the previous year.

Despite the central bank’s prohibition of crypto for payments and its early 2018 warnings against virtual currency, Indonesia’s Commodity Futures Trading Regulatory Agency issued regulations in February 2019 that legitimized cryptocurrencies as speculative commodities and paved the way for cryptocurrency derivatives to be traded on local stock exchanges.

The guidelines provided a legal framework for “the trading of crypto assets as commodities that could become the subject of futures contracts and other derivative contracts traded in the stock market.”

Warjiyo’s warning emphasizing the ban comes just weeks after he announced Bank Indonesia is working on a central bank digital currency (CBDC). The CBDC was announced on May 25, with Bank Indonesia noting the use of digital payments had increased 60.3% year-over-year as of April, with total settlement value up 46% to tag $217.4 billion.

On May 30, the central bank provided more details on the CBDC via Instagram, stating that a state-backed digital currency aligns with its policy of digitization initiative and advances its overall monetary objectives.

According to the Bank for International Settlements, central banks representing 20% of the globe’s population are expected to launch CBDCs within the next three years.