There are several matters about the digital infrastructure that must be built first, including the legal system, especially data and consumer protection.
Jakarta (ANTARA) - Bank Indonesia has not issued a digital currency so far because that could risk collapsing the nation's existing banking system, the bank's chief executive director of communications, Erwin Haryono, has said.

"If a central bank issues a CBDC (Central Bank Digital Currency), but with a faulty design, it will destroy all banks," Haryono said at an online discussion here on Wednesday.

Technology has let Bank Indonesia (BI) issue digital currencies such as cryptocurrencies; however, if BI's digital money can be directly used by the public, commercial banking will potentially no longer be needed, he observed.

"The banking system will collapse," he stressed.

However, he argued, if in future the flow of digitalization strengthens, the central bank will adjust to issuing digital money.

BI is currently thinking about ways that digital money can be relevant without damaging the banking system that already exists in Indonesia, he added.

Before digital currency can be introduced the government must first revise the law which only recognizes the use of physical currency in the form of paper and coins, Hartono said.

Before its ratification, every ministry and government agency will need to synergize for creating a national strategy to deal with currency digitalization, he added.

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"Because there are several matters about the digital infrastructure that must be built first, including the legal system, especially data and consumer protection," he emphasized.

However, he added, BI does not intend to simply hand over the banking system to the private sector that has issued digital currencies, such as cryptocurrencies.

Hence, the central bank has continued to encourage the digitization of money creation activities, money deposits, and money distribution by the current banking system, he said.

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"The banking industry still has to be highly regulated because there is people's money (involved)," Hartono said.

Therefore, Bank Indonesia is still optimistic that the Central Bank Digital Currency (CBDC), or digital rupiah, will be able to increase national economic efficiency, BI Governor Perry Warjiyo said earlier.

"We will circulate the digital rupiah through the digital blockchain technology and distributed ledger technology (DLT) so it will really be efficient," he informed while announcing the outcome of the monthly meeting of the central bank’s board of governors here.

However, it is undeniable that the use of digital rupiah will have risks related to technology and cyber security, he noted.

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Translator: Sanya S, Kenzu T
Editor: Fardah Assegaf
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