Jakarta. Bank Indonesia is currently mulling the possibility of issuing electronic rupiah to adapt to new technology and serve digital users, an official said on Wednesday (31/01).
According to Onny Widjanarko, head of Bank Indonesia's payment system policy department, the central bank began conducting initial research into digital currency benchmarks by central banks in other countries, such as Canada, Singapore and Ecuador, last year.
Ecuador became the first country to roll out its own digital cash in 2015, however its digital money does not replace the use of the country's national currency, the US dollar, as outlined in its monetary code.
"We are currently examining the implications, the impacts, the procedures and consumer protection," Onny said.
The central bank plans to examine the possible legality of and technology suitable to implement the digital currency.
Onny said the digital money offers some advantages, including efficiency, as it can be stored on smartphones, cards and electronic wallets.
Indonesia’s study on central bank digital currency (CDBC) is expected to finish by 2020.
Economist Tony Prasetiantono, director of the Center for Economic and Public Policy Studies at Gadjah Mada University, agreed that issuing digital currency to meet new advances in technology, though new cryptocurrencies, such as Bitcoin, can threaten the country's monetary and financial stability.
"Digital money is an unavoidable necessity; sooner or later Bank Indonesia must use it. The study has now become relevant as Bitcoin ... has become more popular," Tony told the Jakarta Globe.
Bank Indonesia previously banned cryptocurrencies in financial transactions and any payment service provider who violates the law are subject to jail time, fines and a forfeiture of operating permits.
According to Tony, digital money issued by the central bank is valid because there are underlying assets backing the digital currency, unlike cryptocurrency, which has no underlying assets and responsible authority.
However, he also warned of the risks inherent to the technology, as digital money can be hacked even in a country with advanced technology infrastructure. One of Japan’s top virtual currency exchanges, Coincheck, was hacked last week and lost approximately 58 billion yen ($534 million).
"[Bank Indonesia] must anticipate every risk and plan the details in the study. But it needs to be done quickly to block the spread of cryptocurrencies," Tony said.