Central bank of Indonesia adopts regulations banning cryptocurrencies starting January

8 December 2017

Bank Indonesia, the central bank of the country, has adopted the new rules for the fintech startups that go live starting January 1, 2018, within the framework whereof there is a strict prohibition for them to use and operate all cryptocurrencies nationwide. The ban, however, does not affect trading of Bitcoin.

Iwan Junanto Herdiawan, head of the Fintech department at Bank Indonesia, noted that given the volatility of the cryptocurrencies, as observed by the central bank, there are no guarantees for their further movement, as there are no material grounds for such forecasts. He adds that there is little to no possibility to monitor the virtual currency market and, hence, nobody can be responsible for it, making the risks high.

While the cryptocurrency sector in the national economy of Indonesia is still insignificant, the new regulations may be disadvantageous for the market, as cryptocurrencies circulate in the volumes of billions of dollars globally. The rules this way advocate the government’s position on declaring the rupiah as the only legal tender in the country.

Policymakers in Indonesia express their concerns about the effect borne by the digital assets on the financial system, and their potential to impact the inflation and monetary policy. The central bank is particularly concerned about misuse of Bitcoin by terrorist groups or drug traffickers.

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