Though it lacks the authority to ban cryptocurrency trading, Bank Indonesia, Indonesia’ central bank, has stated that digital currencies, including ICO tokens, are “prone to forming asset bubbles and tend to be used as method for money laundering and terrorism funding,” doubling down on previous warnings that the country’s 260 million citizens should steer well clear of the phenomenon.
Unlike in South Korea, whose Prime Minister recently referred to “Bitcoin Zombies” and where concerns are centred on the effect of cryptocurrency trading on individual investors, Indonesian authorities appear to be troubled by the potentially wider destabilising effects of cryptocurrencies.
CONCERNS FOR MACRO-ECONOMIC STABILITY
Bank Indonesia insists that the Rupiah should remain the only legal currency in the country and, from the beginning of this year, fintech companies have been banned from using digital currencies.
For the purposes of the legislation, fintech has been defined to include banks, electronic wallet providers, payment providers and all other financial services.
There is a concern that allowing cryptocurrency activity will bring wider inflationary pressures that Bank Indonesia will then have to respond to. The Assistant Governor of the bank, Dody Budi Waluyo, said this week that cryptocurrencies “may pose a risk and the bank may have to inject liquidity”, adding that such a move would “affect the market and stability.”
Currently, individual investors are still allowed to hold and trade cryptocurrencies, although the level of participation in crypto-based currencies and tokens is disproportionately small, likely as a result of the authorities’ repeated warnings on the subject.