Bank Indonesia Aims to Make Digital Rupiah Exclusive Legal Tender

digital rupiah illustration

Bank Indonesia (BI) has unveiled its intention to establish digital rupiah as the exclusive legal payment method in Indonesia. This initiative is part of BI’s strategy to speed up digitalization, outlined in the Payment System Policy 2024.

Digital rupiah represents the digital version of the national currency, offering functionalities akin to physical money (paper and coin currency), electronic money (chip and server-based systems), and currency through Card-Based Payment Instruments like debit and credit cards commonly used today.

Governor Perry Warjiyo shared insights during the BI Annual Meeting on Wednesday (30/11/2023), stating, “The development of digital rupiah as the only legitimate payment instrument in Indonesia.”

Warjiyo revealed plans for the issuance of the initial phase of the roadmap in the coming year. The Proof of Concept will serve as an early prototype to experiment with ideas or concepts in software development, encompassing the new payment form treasury.

Bank Indonesia, acting as the central bank, will exclusively its issue. It is distinct from cryptocurrencies or stablecoins. Several central banks worldwide, BI included, are exploring the development of digital currencies, commonly known as Central Bank Digital Currencies (CBDC).

Referencing BI’s official website, the development project, known as Project Garuda, oversees various exploratory initiatives for different CBDC architecture designs in Indonesia.

Digital rupiah will be issued in two forms: Wholesale Digital Rupiah (w-Digital Rupiah), with limited access for wholesale transactions like monetary operations, foreign exchange transactions, and money market transactions.

Additionally, Retail Digital Rupiah (r-Digital Rupiah) will have open access for the public, catering to various retail transactions, including payment and transfer transactions for individuals and businesses (merchants and corporations).

Previously reported, it will be regulated in the financial omnibus law or the Financial Sector Development and Strengthening Bill (RUU PPSK).

This is as stated in the draft PPSK Bill version 5.0 which was published on Thursday (8/12/2022), in Part Six concerning the payment. In this case, Bank Indonesia as the central bank is the only institution authorized to manage it. Thus reads Article 14A paragraph (2).

Referring to the regulation, it will be regulated in Article 2 paragraph (2) in Law Number 7 of 2011 concerning Currency (State Gazette of the Republic of Indonesia of 2011 Number 64, Supplement to State Gazette of the Republic of Indonesia Number 5223).

“The provisions of Article 2 are amended so that it reads as follows, paragraph (2) types of rupiah consist of paper, metal, and digital,” said the draft PPSK Bill Article 2 paragraph (2) based on the December 8, 2022, draft, quoted on Tuesday ( 13/12/2022).