JAKARTA (TheInsiderStories) – Indonesia’s Financial Service Authority (FSA) affirmed that the financial industry is barred from actively participating in crypto-currency transactions, said the chairman on Monday (04/06).
Previously, Commodity Futures Trading Regulatory Agency said government will allow crypto-currency as futures commodities that can be traded in the future exchange.
The commodity market watchdog have explored the possibility of trading cryptocurrency for futures exchanges since January 2018 but was faced with Bank Indonesia’s regulation that banned the use of virtual money as an official currency.
Market Supervision and Development Bureau of the Trade Ministry’s Futures Exchange Supervisory Board Dharma Yoga admitted, the decision was taken by the commodity agency after conducted a study for the last four months.
Responding to that, FSA’s chairman Wimboh Santoso asserted his institution has not engaged in communication with the agency and he emphasized that financial industry are bound by regulations that bar them from conducting trade with crypto-currency.
Furthermore, he elaborated that the ban corresponds to the existing regulations which blatantly mentions that crypto-currency are not considered to be a product of the financial services industry.
The legalization of crypto-currency also contradicts with the central bank who does not recognize the virtual money as a legal tender. BI payment system policy department head Onny Widjanarko earlier said the crypto-currency potentially creates a risk of bubble that will affect the financial system stability.
In addition, there is also the risk of regulatory arbitrage because transactions can be made from other countries with more accommodative provisions.
Regarding the issue of volatility, BI has issued a statement curbing the use of crypto-currency, affirming a hardening stance on the popularity of what it refers to as virtual currencies such as Bitcoin.
It affirms that virtual money, 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.
Former central bank governor Agus Martowardojo has 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 crypto-currency have soared amid what many in traditional finance have labelled a bubble. Countries including the United Kingdom, India, Russia and others have recently cautioned investors and traders over the perceived risks involved in crypto-currency.
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 crypto-currency 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 crypto-currency for inter-country transactions.
She assured all that the digital currencies issued by BI and other central banks were different from current crypto-currency because the digital money would be based on the confirmed value of real assets.
Observing the current global financial market inequality on the policy makers’ views should be diminish. In our view the same stance of policy makers in the financial sector is needed so as not to confuse the players and disrupt the financial market conditions.
The high risk in this new financial instrument should also be a consideration for policy makers in making decisions as investors in Indonesia are immature and risky for financial market stability.