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Under “Project Garuda” Indonesia is pushing further its plans for central bank digital currency (CBDC) – Digital Rupiah -starting with transactions among local banks. Last week, the central bank of Indonesia launched the design for Digital Rupiah.
This development comes at a time when other major economies, including India, have been experimenting with CBDCs. In a briefing on Monday, Governor Perry Warjiyo for the central bank said: “Digital rupiah is inevitable. It’s the transaction tool of the future”.
In an event on Digital Rupiah, Governor Perry said that the CBDC will use a technology platform that will be compatible with other central bank digital currencies. “Therefore, in terms of infrastructure, the digital rupiah can be integrated, interconnected and interoperable (with other CBDCs),” he said.
Interestingly, Perry went on to add that in the future, the planned digital rupiah currency will be used to buy products in the Metaverse. For this, Indonesia’s central bank is also ensuring that the Digital Rupiah works for cross-border payments.
Furthermore, Perry added that there will be an agreement among the central banks over the exchange rates used for digital currencies. This agreement will also include handling operational supervision along with managing cyber risks and capital flows.
Indonesia to Roll Out Digital Rupiah In Phases
The Central Bank of Indonesia noted that they will be rolling out the CBDC in three different phases. The first will be the wholesale form of CBDC used by larger banks to transfer funds among themselves or with the central bank.
In the next phase of the launch, the CBDC use will be expanded for interbank money market and monetary operations. In the last phase, the Digital Rupiah will be available to retail consumers for payments to fund transfers.
The central bank will start by limiting the use of the CBDC to qualified banks. To receive their Digital Rupiah tokens, these banks first need to convert their reserves at the central bank. Filianingsih Hendarta, the head of payment systems policy said:
“This ensures the issuance of digital rupiah won’t impact the size of Bank Indonesia’s balance sheet, meaning it has a neutral monetary impact”.
Later, citizens of Indonesia will get access to CBDC for retail use by exchanging deposits, bank notes, etc. Besides, the central bank will distribute the CBDC directly to end-users.
The wholesale CBDC will be entirely token-based while the retail CBDC will be account-based as well as token-based. In an additional development, Indonesia is also planning to launch its crypto stock market by the end of this year.
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