Although crypto can potentially increase financial inclusion, Indonesia’s central bank governor is skeptical about them. He warns that they might also pose systemic dangers to the financial system.
Governor Doni Joewono said this while speaking at a G20 gathering in Bali. He believes a crypto regulatory structure is essential.
This regulatory structure would guarantee that its participation in the financial system does not present systemic dangers. However, the governor acknowledged that cryptocurrency could enhance the effectiveness of the current financial system.
Additionally, he said the digitalization of the COVID-19 pandemic’s financial sector promoted the usage of cryptocurrencies. Currently, the Indonesian authorities now view crypto as commodities.
Religious Councils Ban Crypto
In November, the central bank recommended a CBDC as a tool to “combat” haram cryptos. This is because they are prohibited as payment methods.
On matters of Islamic finance, the finance ministry and the central bank interact with the National Ulema Council (MUI). This is a religious organization that upholds Shariah law in Indonesia.
Furthermore, the MUI banned crypto in 2021 by declaring it to be haram for Muslims. This was due to its features of uncertainty and gambling.
Moreover, the highest Muslim population in the world resides in Indonesia. According to the MUI, Shariah law will only enable involvement if cryptos have a clear advantage.
However, the government has permitted the trading of crypto alongside items for commodities futures. The Ministry of Commerce oversees these processes.
Also, the government established a crypto exchange with four trading pairs for the Indonesian Rupiah. The aim was to safeguard small-scale investors in the country.
Seventeen other businesses are listed with the Commodity Futures Trading Commission (BAPPEBTI). One company, Indodax, has over five million customers in 2022.
Cryptocurrency Taxes In Indonesia
In April, a federal tax official imposed a VAT on cryptocurrency transactions as well as a 0.1% capital gains tax. This is because cryptocurrencies are categorized as commodities rather than currencies in Indonesia.
The country’s Financial Service Authority prohibits the sale of crypto assets by financial services firms. On June 11th, the Financial Stability Board of the Group of 20 economies stated that it would propose new cryptocurrency regulations in October.
Indonesia is a member of the Group of 20 economies. Although the FSB lacks legislative capacity, all its members concur that regulatory principles are imperative.
Joewono said the central bank is also looking at creating its own digital money (CBDC). Therefore, the central bank intends to publish a white paper for the electronic Rupiah before 2022 ends.
In a recent letter to the Bank for International Settlements, the financial institution gave more details. It stated that the CBDC would be tailored to retail and wholesale uses.
However, the architecture, international collaborations, and underlying technology are still a mystery.