JAKARTA (TheInsiderStories) – Indonesian central bank Governor Agus D.W Martowardojo will end his tenure this May, and President Joko Widodo (Jokowi) has made it known that he is on the lookout for a suitable candidate to succeed as Bank Indonesia (BI), the country’s central bank.
With three months to go before Martowardojo’s term ends, there is still no word from President Widodo as to whether he intends to nominate the Governor for a second
run. Whoever lands the job, economists want someone who’ll continue Martowardojo’s reforms: they’ve helped cool inflation, tame currency volatility and earned the central bank credibility with investors and credit rating firms.
However, many challenges and issues need to be addressed by a new governor; among others is the matter of cryptocurrency. ‘Blockchain’, the underlying technology and innovation behind Bitcoin and ICOs, is in fact one of the most promising emerging technologies of the last decade. Blockchain maintains a record of transactions and keeps a copy in many computers around the world.
The technological brilliance is in keeping these copies identical and in sync. Some
estimate that over 150,000 computers in the world currently maintain a record of the
Bitcoin blockchain and ensure its integrity through a process called mining.
Somehow there is real innovation going on; hence, value is being created, and
although there will be short-term price fluctuations, Blockchain and cryptocurrencies
are here to stay.
Over the past several months, more than US$10 billion in Bitcoin are exchanged every
day on average, and in 2017 an estimated $5 billion was raised through initial coin
offerings (ICOs), a new means to raise funds through the issuance of new
cryptocurrencies or tokens.
Regarding the issue of volatility, BI has issued a statement curbing the use of cryptocurrency, affirming a hardening stance on the popularity of what it refers to as ‘virtual currencies’ such as Bitcoin.
‘BI Warns all Parties against Selling, Buying or Trading Virtual Currency’ is the title of today’s missive from Bank Indonesia, by way of its Department of Communications.
It affirms that virtual currency, including Bitcoin, is not to be recognized as a valid payment instrument, so it is prohibited from being used as a means of payment in Indonesia.
Martowardojo issued statements late last year causing regional media to urge retail holders to sell back into fiat ahead of a ban. That followed Fall’s shutdown of bitcoin payment providers and businesses restructuring in an effort to get ahead of coming regulation.
With the new notice, the Bank joins a number of global central banks in issuing warnings as the prices of cryptocurrencies have soared amid what many in traditional finance have labelled a bubble. Countries including the U.K., India, Russia and others have recently cautioned investors and traders over the perceived risks involved in cryptocurrencies.
BI’s pronouncements routinely contrast with impressions on the street, as Indonesians do seem to have an appetite for the decentralized currency.
Somehow, the former Indonesia Finance Minster Chatib Basri stated banning digital currency is not the best solution for the central bank; he added the bank has to embrace and go further to explore the sophistication of digital currency, since this technology is predicted to grow in the next few years.
Although Bitcoin has been declared an illegal payment and transaction instrument in the country, the government is still considering the potential use of cryptocurrency as an investment instrument.
Assistant to BI Executive Director for Payment Systems Susiato Dewi said a ‘digital Rupiah’ would be trialled this year in an effort to help make the payment system more efficient.
She added that central banks in other countries had also begun digital currency trials to anticipate the possible use of cryptocurrencies for inter-country transactions.
She assured all that the digital currencies issued by BI and other central banks were different from current cryptocurrencies because the digital money would be based on the confirmed value of real assets.