In what may be yet another door slamming shut to the use of cryptocurrency in mainstream commerce, Indonesia is nixing the use of the digital offerings as payments.
As reported by Yahoo Finance, the country’s central bank, the Bank of Indonesia, will not allow cryptocurrencies to be used for payments. The prohibition comes via announcement from Governor Perry Warjiyo in remarks made in a virtual seminar this week. As Yahoo Finance reported, crypto will not be used in the form of “other financial services tools.” Financial firms are likely to follow suit, as the central bank will seek their compliance.
The country is in the midst of severely curtailing crypto-related activities, having forced operations to shut down at three crypto trading platforms.
The site noted that cryptos still can be traded as commodities, which of course implies that at least some activity will be OK in that country.
We note that the moves by various countries to crack down on cryptos may come in part as a way to get central bank digital currencies (CBDCs) — digital fiat — out into the field. In one recent example, banking regulators in China said last month that they’d banned financial institutions, including banks and payments companies, from providing services related to cryptocurrencies. That ban would effectively keep cryptos from finding use cases in mainstream commercial or retail settings. Indonesia is reportedly in the midst of exploring its own CBDC.
The joint statement from China Internet Finance Association, China Banking Association and China Payment and Clearing Association said (via translation) in part: “Financial institutions, payment institutions and other member units must earnestly strengthen their social responsibilities. They must not use virtual currency to price products and services, underwrite insurance businesses related to virtual currencies or include virtual currencies in the scope of insurance liability, and must not directly or indirectly provide customers with other services.”
Forging Ahead With CBDCS
Yet at the same time, China is still forging ahead with its digital yuan, which is being trialed through several projects. It may be the case that by outlawing cryptos in payments, central banks are effectively banishing bitcoin and others to the realms of (permanent) speculation, and even shady activities.
In another example, Iran has banned bitcoin mining. Turkey, last month banned the use of cryptocurrency and associated assets as a payment method. The Central Bank of the Republic of Turkey said that using crypto for purchases could cause “irreparable” damage and transaction risks, as we noted back then.
Then again, there’s El Salvador. In that country bitcoin is becoming a form of legal tender, right alongside the country’s official currency, the U.S. dollar.