Indonesia Central Bank Bans FinTechs From Using Cryptocurrency

As part of a new set of rules for FinTech companies, Indonesia’s central bank is preventing them from using cryptocurrency.

According to a Thursday (Dec. 7) report by Bloomberg, Bank Indonesia deputy governor Sugeng told reporters in Jakarta the rule goes into effect on Jan. 1 and doesn’t apply to trading of digital currencies like Bitcoin.

“Virtual currency is very volatile, according to our observation, and nobody can guarantee its movement because there is no basis for it,” said Iwan Junanto Herdiawan, head of the FinTech office at Bank Indonesia. “Nobody can monitor and be responsible for it, either. So, the risks are high and can be widespread.”

The cryptocurrencies market in Indonesia is small, but the new rule could hurt a market that has become worth hundreds of billions of dollars around the globe. It also reinforces the country’s position that the rupiah is the only legal tender in Indonesia, which is Southeast Asia’s biggest economy.

Indonesian policymakers are concerned about the impact digital currencies will have on the financial system in the country, including the impact it may have on inflation and monetary policy. Bank Indonesia also expressed concerns about using bitcoin to fund terrorism or for a system used by drug traffickers.

“We don’t wish to see this turning into a speculation or bubble, which can then lead to losses,” said Sri Mulyani Indrawati, finance minister.

Not all of the officials in Indonesia are supportive of the ban, with Indonesia’s investment board chief Tom Lembong saying he is  “very supportive” of cryptocurrencies. Lembong said the rise in the price of bitcoin this year is “a 100 percent free-market solution created spontaneously by consumers and private sector innovators.”


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