News Risk Management 17 Jan 2018

Indonesia:Central bank issues warning against virtual currencies

17 Jan 2018

Bank Indonesia has warned all parties not to sell, buy or trade virtual currencies (VCs), emphasising that VCs including bitcoin are not recognised as legitimate instruments of payment in the country.

“Ownership of virtual currency is highly risky and loaded with speculations, considering there is no authority responsible, no official administrator, no underlying assets to base the virtual currency price, and that the trade value is highly volatile,” said the Indonesian central bank in a statement on Saturday.

“This means that virtual currencies are vulnerable to bubble risks, and susceptible to be used for money laundering and terrorism financing, therefore can potentially impact financial system stability and cause financial harm to society. All things considered, Bank Indonesia warns all parties not to sell, buy, or trade virtual currency.”

The central bank further highlighted that it forbids all payment system operators and financial technology operators in Indonesia, both bank and nonbank institutions, to process transactions using VCs.

This follows its regulation issued earlier this month to ban the use of VCs by FinTech companies involved in payment statements, though it had then not prohibited the trading of VCs, saying that it would examine whether there was a need to do so.

Meanwhile, the regulation of VCs is experiencing a roller coaster ride in Asia. South Korea, notably, has been divided between a tech-savvy nation whose young population quickly embraced investments in these currencies and a government concerned over their rapid rise.

Just last week, an announcement by South Korean justice minister Park Sang-ki  caused global bitcoin prices to plunge when he said the government was preparing legislation against the trading of VCs. An online petition signed by over 200,000 on the website of the President’s office has opposed the crackdown, as of yesterday. 

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