Bank Indonesia Initiates CBDC Investigation, Collaborative Trials

Bank Indonesia (BI) has officially declared its intention to proceed with the investigation of a central bank digital currency (CBDC) in 2024. This will be achieved by establishing collaborative, full-scale trials with prominent commercial institutions.

According to Business Times, BI’s CBDC plans will center on blockchain-based wholesale interbank settlement.

The digital rupiah, the proposed CBDC of Indonesia, has been the subject of preliminary research, which culminated in the establishment of a proof-of-concept in 2022.

The banking regulator will examine the technological and regulatory framework for introducing the digital rupiah during this year’s pilot program.

BI Governor Perry Warjiyo stated, “We have issued the proof-of-concept for the digital currency and anticipate designing the infrastructure and technology we will employ soon.”

An abundance of information gathered from a public consultation with key industry stakeholders forms the basis of the impending pilot.

The consultation results dashed aspirations for a CBDC retail offering, with Warjiyo stating that the “rupiah’s sovereignty in the digital era” hinges on the emphasis on wholesale offerings.

Since then, an armada of commercial banks and technical partners have joined forces with the BI to aid in the CBDC pilot.

The pilot initiative of the central bank will explore potential applications beyond local interbank payments, including tokenizations, cross-border settlements, foreign exchange transactions, and the metaverse.

Reportedly, the central bank of Indonesia is working towards interoperability with CBDCs from other nations, which suggests a gradual implementation.

Before moving forward with a retail CBDC, the bank initially disclosed it would introduce a digital rupiah for money market transactions and monetary operations.

“We will also advocate for the government’s downstream initiative and several other policies,” Warjiyo stated in February 2022.

Digital currencies are facing increased scrutiny from Indonesian regulators as they support the introduction of a CBDC.

The nation is considering categorizing digital currencies as securities and requiring exchanges to maintain a distinct segregation of funds to prevent the mixing of assets.

Following the regulatory changes affecting the industry, two-thirds of the directors of digital exchanges must be domiciled in Indonesia, per a resolution from the Ministry of Trade.

To promote standardization, Indonesia has since established a national digital currency exchange instead of explicitly prohibiting the asset class.