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Indonesia’s central bank considers digital rupiah to “combat” cryptocurrency

Earlier this year, Bank Indonesia (BI) as the country’s central bank, announced its plans to introduce a central bank digital currency (CBDC). Governor Perry Warjiyo stated in May that it is on its way, but did not provide a particular debut date.

Locals have converted from cash to digital payments during the COVID-19 outbreak, according to a spokesperson from BI who declined to be named. As a result, the organisation believes that a CBDC that is supervised and controlled by the authorities would be the greatest alternative for that monetary transformation.

According to Bloomberg, Bank Indonesia now has a new purpose to produce a digital rupiah – to “combat” cryptocurrencies that have a big impact on the country’s financial system. A CBDC is a more dependable choice than bitcoin, ether and the rest of the private digital assets, according to Juda Agung, an Assistant Governor at the bank. “One of the weapons to combat crypto would be a CBDC. We believe that CBDC is more trustworthy than cryptocurrency. CBDC would be a part of a larger effort to address crypto’s use in financial transactions”, said Mr Agung.

Meanwhile, the Indonesian government plans to establish a dedicated digital asset exchange by the end of 2021, citing the country’s more than 7 million crypto investors and $30 billion in transaction value. In just a year, the number of investors doubled compared to 2020.

A few weeks ago, Indonesia’s leading Islamic scholar’s body, the National Ulema Council (MUI), took a strong position against cryptocurrencies, pronouncing all operations in the business “haram,” or forbidden. According to Asrorun Niam Soleh, Chairman of the MUI Fatwa Commission, the rejection stems from the belief that bitcoin and other cryptocurrencies are plagued by “uncertainty, wagering, and harm.” Nonetheless, he clarified that digital assets can be exchanged as a commodity if they follow Shariah law and provide a “clear advantage.”

Indonesia is the world’s most populous Muslim-majority country, with a population of about 273 million people. Having said that, the initiative could have a big impact on the bitcoin ecosystem in the area.