Bank Indonesia (BI) is advancing a plan to test the use of its new central bank digital currency (CBDC).
The specified financial regulator intends to launch the process of applying virtual rupiah in a pilot mode next year. The governor of BI, Perry Warjiyo, stated that the goal of the organization he heads is to use blockchain technology to create a digital version of the national Indonesian currency.
The CBDC of Indonesia’s financial regulator will be used for wholesale interbank settlements next year. This project will bring Indonesia closer to the group of countries that have already launched virtual versions of their national currencies. CBDC is currently used in India and China.
Perry Warjiyo during a conversation with media representatives, said that BI has published a confirmation of the concept of virtual currency and is preparing to create appropriate technologies and infrastructure that will be applied shortly.
Currently, the central bank of Indonesia, as part of the preliminary testing of digital money, is interacting with financial institutions to get feedback from these organizations. Perry Warjiyo said that the virtual currency will be used on a platform that will make it compatible with similar developments of financial regulators in other countries.
As part of the experiment, BI wants to apply the digital rupiah in two directions, including wholesale and retail trade. In the framework of the use of virtual currency in sphere retail, consumers will have direct access to CBDC. In this case, the features of applying digital money will be identical to the ways of using cash. When testing the digital rupiah in the wholesale trade sphere, special attention will be paid to improving the efficiency of payment transactions between BI and other financial institutions. In this case, the blockchain will be used.
Analysts say that the advantage of CBDC is that the central bank fully supports the virtual currency. Consumers can also exchange this digital money on currency markets and online exchanges such as Coinbase. Moreover, the advantage of CBDC is that this asset can be used for settlements between businesses and individuals.
Deputy Governor of BI Filianingsih Hendarta says that the financial regulator is striving to develop a digital legal tender that competes favorably with private sector alternatives in terms of security and economic efficiency. According to her, industry stakeholders emphasize the importance of careful design and high-quality implementation of virtual currency to reduce potential risks for payment systems and expand access to financial services.
Analysts from the Institute for Development of Economics and Finance (Indef) in Jakarta predict that the digital rupiah will be a reflection of the success of QR payments. Indef researcher Nailul Huda says that settlements in the digital payment format could be made faster and cheaper with CBDC. According to the expert, a virtual currency would cut credit risk and eliminate the need for correspondent banks.
Nailul Huda also noted that CBDC can change the traditional banking dynamic by transforming how individuals and businesses manage funds and transfer money. According to the expert, such a change could affect traditional banking services, creating a competitive problem for companies that rely on standard payment methods.
As we have reported earlier, Bank of Korea Plans to Launch Retail CBDC Pilot Program.