JAKARTA (TheInsiderStories) – Bank Indonesia (BI) has slapped a ban on virtual currency Bitcoin, a payment protocol popular globally, derived from financial technology (fintech) companies. The ruling banning Bitcoin will become effective in January 2018, according to Bank Indonesia Deputy Governor Sugeng.
This regulation attempts to suppress the use of Bitcoin in Indonesia for payments; Bitcoin is considered ‘illegal’ as it is unregulated and allied with concerns about potential Bitcoin application to financing terrorism, money laundering or drug trafficking.
This restriction is also perceived as an early warning for financial technology start-ups currently blooming in Indonesia.
“Bank Indonesia strictly prohibits fintech companies from accepting any ‘virtual currency’ as an instrument of payment in transactions. Virtual currency is hereby declared invalid as a payment instrument in Indonesia,’ said Sugeng Thursday (7/12).
Bitcoin is a digital currency created in 2009, derived from theoretical concepts laid out in a white paper by the mysterious Satoshi Nakamoto, whose true identity has yet to be verified.
Bitcoin promises transaction fees lower than traditional online payment mechanisms, and is regulated by a decentralized authority, unlike government-issued currencies.
The uncertainty of the issuer has forced many central banks around the world to proscribe Bitcoin as a legal entity in their financial systems.
They also see it as an unwelcome competitor to their increasingly shaky fiat currencies (almost none are backed up by real assets such as gold bullion). Those championing Bitcoin argue that it is a welcome alternative to government-manipulated currency transactions, and that the ‘terrorism / laundering / drugs’ issues are red herrings.
Sugeng warned that the unclear position of Bitcoin entity could potentially damage the Indonesian economy, due to unexpected speculation and its high exchange rate volatility.
“It is totally different from the Rupiah as a legal national payment instrument, where Bank Indonesia is the legal administrator,” he said. Apparently central banks are not confident enough about their fiat currencies to withstand competition from virtual ones.
Meanwhile, Indonesian Finance Minister Sri Mulyani expects speculation over Bitcoin trades will not arouse any volatility that could result in a ‘bubble economy’ (although some experts argue we are already there, particularly in regard to relying on an increasingly devalued US dollar).
“We do not expect speculation or a bubble to result in losses,” she said. Governments always want to extend their control over all financial matters.
With this stance, Indonesia joins ‘command-economy’ totalitarian nations such as China in cracking down on crypto-currencies. In early September, regulators banned ICOs and forced exchanges to close. However, transactions in Bitcoin have not yet been outlawed.
Russia’s deputy finance minister also announced in September that he expects pending legislation on cryptocurrencies to feature a ban on payments. There is such little confidence in the Russian Ruble that more cash dollars than rubles are said to be circulating around the Russian economy. The dollar endures as a global reserve currency, in spite of efforts by adversaries like Iran, Russia, China and Venezuela to establish parallel instruments.
Despite its controversial status and alarmist warnings from vested interests (governments), Bitcoin continued to rise in value this week, as it reached ever-greater highs: its exchange rate rose by 16.5 per cent to a new peak of $14,507, according to data from the electronic cryptocurrency platform Coinmarketcap.
On Wednesday, the Bitcoin exchange rate rose by 10.5 per cent to US$13,081, setting an unprecedented high. This also points to growing mistrust of devalued fiat currencies like the Euro, US dollar and Japanese Yen.
On Nov. 29, the cryptocurrency set a historical record, rising by more than 10 per cent and breaking the US$11,000 mark. Earlier, on Nov. 28 Bitcoin exchange rate broke through US$10,000 for the first time, according to the data from Coinmarketcap.
Written by Elisa Valenta, email: email@example.com