As of January first, financial technology firms in Indonesia are now restricted from using digital currencies in their business models.
Bank Indonesia Deputy Governor Sugeng told reporters in Jakarta last Thursday that the ban is part of a push to impose regulation on fintech companies, including a mandate that digital payment system providers secure a central bank license, according to Bloomberg.
The worth of the global cryptocurrency market has reached over $530 Billion, with many startups and financial technology companies having launched their own digital currencies or “tokens” in an Initial Coin Offering (ICO) over the last year to raise funding for their business ideas as an alternative to traditional venture capital.
While this decision cuts off that access to alternative capital for fintechs, citizens will still be allowed to trade digital currencies in-country.
Indonesia’s central bank cites the volatility of cryptocurrency as justification for the ban. Dody Budi Waluyo, Indonesia’s Assistant Governor, reportedly said that the bank is also concerned about the potential impact an unregulated currency could have on the economy, specifically any contribution to inflationary pressures.
While cryptocurrencies are volatile and their security still developing, this move signals the Indonesian government’s resistance to relinquishing control over the currency spent within country, and thus its own economy.
Indonesia isn’t the only country looking to secure the future of currency and finance within its borders. China already outlawed ICOs earlier this year, and leaving only one cryptocurrency exchange in operation. For its part, the Federal Reserve (the central bank of the U.S.) is considering another route to control the future of digital money.
“It’s really very premature to be talking about the Federal Reserve offering digital currencies, but it is something we are thinking about,” New York President William Dudley recently said, according to the Wall Street Journal.
Other central banks, including Sweden’s Riksbank, are also considering creating their own digital currencies.
Bitcoin, the most well-known cryptocurrency, is created privately, unlike national currencies like the U.S. dollar or Indonesian rupiah, which are issued by governments. Time will only tell how adoption of digital digital currencies by governments will play out, and what role will be left for hard cash or Bitcoin to play in the future economy of the world.
Cadence is a fintech reporter and writer at Fintech Unltd, where she covers the changing landscape of financial technologies. Previously, Cadence interned at Psychology Today, Business Insider and the Wisconsin State Journal. Cadence is interested in how science and technology intersect with power and culture and is curious about the world we are creating for tomorrow, consciously or not. She graduated from the University of Wisconsin–Madison in 2017 with degrees in Journalism and Chinese. Send tips and story ideas to Cadence at [email protected] You can also follow her on Twitter @cadencebambenek.