BI bans Bitcoin, demands fintech firms to register
Bank Indonesia (BI) has taken a strong stance against the widespread use of virtual currencies, including Bitcoin, as a method of payment due to the fear of volatility they can bring to the economy.
The prohibition has been set in the central bank’s new regulation, called the PBI No. 19/12/ PBI/2017 on the implementation of fintech, slated to come into effect on Jan. 1, 2018.
In the new regulation, which was published on Thursday, BI declared cryptocurrencies as illegal due to their high price volatility that could pose huge risks to Indonesia’s economy, said BI Deputy Governor Sugeng.
“Since the beginning, BI has warned that the only legal payment tool in Indonesia is the rupiah,” he added on Thursday.
“Other payment tools such as virtual currencies that are extremely volatile would have a negative impact on our economy.”
With a high degree of price fluctuations in virtual currencies, Sugeng said consumers would not feel protected as they would have to bear huge investment uncertainties. BI had declared that if investors exposed themselves to such risks, the central bank would not be responsible for any losses incurred, he said.
“Imagine if virtual currencies are released [legally] on the market. The prices may peak, then drop drastically. People could become really wealthy, then suddenly they become destitute.”
BI has banned the use of cryptocurrencies by fintech companies involved in payment systems, but it has yet to regulate indirect transactions based on the illegal currencies as it was still in a review process.
“We have banned the use of virtual currencies as a payment tool. However, we haven’t regulated digital currencies as objects of transactions,” BI legal department head Rosalia Suci said.
As an example, Rosalia said, it would be prohibited for someone to buy a car with five Bitcoins. However, BI had yet to regulate a transaction in which someone wanted to buy five Bitcoins for Rp 25 million (US$1,850), then use the rupiah to purchase something, she said.
Countries have different stances on Bitcoin, with China and Russia rejecting it, while Japan accepts it as payment.
Bitcoin traded at Rp 233.4 million rupiah per unit at 07:40 GMT on Thursday at bitcoin.co.id, a local online cryptocurrency exchange, according to Reuters.
The new BI regulation requires fintech companies categorized as those under payment system supervision to register at the central bank in an effort to balance technological innovation and economic stability in Indonesia.
After registering, fintech startups with potential “disruptive innovations” will have to take part in a procedure called “regulatory sandbox” in which they should follow a six-month to one-year program to test their services under the central bank’s supervision.
BI fintech office head Junanto Herdiawan said there was no requirement of participation in the regulatory sandbox for fintech companies categorized as having a traditional licensing framework.
When regulatory sandbox participants received the green light from BI they might go ahead with obtaining a license and approval before they could be authorized to conduct their activities in the public, he said.
He added that BI would continuously monitor and supervise activities of registered fintech firms as they were required to submit data and information from time to time.