According to multiple news outlets, Bank Indonesia, the country’s banking watchdog, is planning to issue digital Rupiah for transactions. The regulator wants to adopt the new virtual token as legal tender in the country for retail use.
Meanwhile, the central bank will ensure that the new policy will allow users to exchange the token across the country’s border.
Digital Rupiah to be Ready Toward the End of the Year
Indonesia’s monetary authority will soon issue the national fiat in virtual format for commercial trade. In addition, the central bank will also unveil the currency’s design later in the year.
The Central Bank Governor, Perry Warjiyo, revealed to Bloomberg that the aim of the Rupiah is the same as the paper currency. Meanwhile, Indonesia recognizes paper money as the country’s only legal means of transaction.
Bank Indonesia has been working on developing its central bank digital currency (CBDC) since last year. The CBDC’s major goal is to increase the usage of digital assets across the board for utility and transactions.
The Asian country has one of the region’s highest cryptocurrency use cases. Several of the country’s largest businesses have dealings with crypto payments as well. With more than 270 million people, Indonesia has a large population of unbanked people who need digital financial services.
Furthermore, investors are looking at crypto assets as a hedge against inflation, which has driven their adoption.
In recent years, Indonesians have become increasingly interested in cryptocurrencies like bitcoin, Ethereum, and Solana.
The government supported digital currency expansion amid a bigger plan to revamp the nation’s digital economy. Despite being forbidden as a means of exchange in Indonesia, the government permits trading cryptocurrencies as commodities.
Rapid Adoption of Blockchain Technology
Like Indonesia, monetary policymakers in other countries are considering integrating blockchain technology. The plan is to accelerate the process of transactions and payment settlement using blockchain infrastructure.
As a result, countries like Australia and the Philippines are considering blockchain technology through their respective central banks. They plan to carry out a wholesome digital currency shift to meet their nations’ expansion into the digital economy. The move is part of the government’s readiness to venture into the virtual currency ecosystem.
Moreover, countries like Singapore, Malaysia, South Africa, and Australia have begun trials of using CBDC for cross-border payment. The regulators want a shared platform to facilitate cross-border transactions via central bank-issued digital tokens.
However, CBDC development is not going at its expected pace after the initial excitement.
Meanwhile, Bank Indonesia is considering transferring technology with partners and updating the Rupiah’s security. Upon completion of the CBDC, the central bank will disburse it to banks and other financial service providers.
The banks will sell the digital Rupiah to smaller service providers for retail use. Bank Indonesia intends to oversee the issuance and distribution of digital tokens to prevent illicit use cases.
In addition, the regulator wants to avoid situations where households prefer to deal directly with the central bank.