The rapid development of information technology has brought big changes in almost all aspects, including the monetary sector. The monetary authorities have to adopt the development of digital technology, transforming from conventional patterns into strategies based on digital technology.
In line with the above developments, Bank Indonesia (BI) as the central bank is currently formulating a digital currency called the Central Bank Digital Currency (CBDC). The preparatory stage started several years ago when the emergence of blockchain technology made it possible to use cryptocurrency as “money”.
In BI’s view, cryptocurrencies are not suitable to use as a medium of exchange. They do not have a solid valuation basis. With their highly volatile value, cryptocurrencies have the potential to disrupt the stability of the national financial system.
As an investment asset, cryptocurrencies also exhibit many disadvantages. The very limited supply of cryptocurrencies cannot keep up with the demand. As a consequence, cryptocurrencies become a speculative asset that overrides consumer protection.
For this point, the issuance of the CBDC is aimed at supporting payment security and the stability of the domestic financial system. The mitigation of potential risks that are most likely caused by digital money facilitated by information technology companies is a secondary reason.
In a narrower scope, the issuance of the CBDC is directed at attaining efficiency in the domestic payment system, increasing financial inclusiveness and eliminating shadow banking. The cashless society that has been initiated by BI over the last decade will undoubtedly be realized quickly.
Although it supports a country’s economic progress, the issuance of the CBDC is inseparable from a number of fundamental problems that need to be resolved first. The level of public acceptance should absolutely be a major concern. The level of acceptance is largely determined by the degree of digital literacy.