Bank Indonesia (BI) is advancing its efforts to launch a trial for its central bank digital currency (CBDC), the digital rupiah, in 2024. BI Governor Perry Warjiyo revealed that the digital rupiah will utilise blockchain technology, aiming to digitise the Indonesian currency. This initiative places Indonesia on the path to join countries like China and India, which have already introduced their own CBDCs.
Warjiyo, at a recent press event, mentioned the completion of a proof-of-concept for the digital currency. BI is now focusing on designing the necessary technology and infrastructure. The initial phase will see the digital rupiah being implemented for wholesale interbank settlements.
Collaborating with major financial institutions for the trial, BI is seeking their insights and feedback. The governor highlighted that the digital rupiah will operate on a platform ensuring compatibility with other central banks’ digital currencies.
BI’s experimentation with the digital rupiah encompasses two main areas: wholesale and retail. The wholesale aspect targets the enhancement of interbank and central bank payment efficiencies through blockchain. In the retail sphere, consumers would use the CBDC similarly to cash.
Analysts recognise the CBDC’s strengths, including full backing by the central bank, exchangeability in foreign markets and online exchanges like Coinbase, and its potential for settling individual and business payments. Compared to private cryptocurrencies, the CBDC is viewed as more secure, less volatile, and more energy-efficient. While Indonesia prohibits the use of cryptocurrencies for payments, it permits them as investment assets.
Indef, a Jakarta-based think tank, observes that BI aims for the digital rupiah to mirror the success of QR payments. Since the launch of the Quick Response Code Indonesian Standard (QRIS) platform in May 2019, which streamlined the payment ecosystem, QRIS transactions have soared to 1.5 billion, amounting to a total of 24.9 trillion rupiah.
Indef researcher Nailul Huda notes that the CBDC could enable cheaper and faster digital payments, potentially even instant transactions, reducing credit risk and eliminating the need for correspondent banks in cross-border transactions. However, he also warns that CBDCs might alter traditional banking dynamics, affecting the demand for conventional banking services and introducing competition for companies relying on traditional payment methods.
