A battle seems to be brewing within the crypto arena – one that pits central banks against the bitcoins (and the other cryptocurrencies) of the world.
The latest illustration comes via reports that Indonesia’s central bank is considering using central bank digital currencies (CBDCs) as a way to “fight” cryptocurrencies.
Per reports from Bloomberg, Juda Agung, an assistant governor at the central bank, said in comments to Parliament that a digital rupiah could be utilized in this way: “A CBDC would be one of the tools to fight crypto. We assume that people would find CBDC more credible than crypto. CBDC would be part of an effort to address the use of crypto in financial transactions.”
There are at least some other signs that bitcoin and other digital coins would be hobbled a bit in Indonesia. As Bloomberg noted, the National Ulema Council has said that in general, cryptocurrencies are viewed as “haram,” or are banned, due in part to the “wagering” aspects of the cryptos themselves. The ban would have the impact of limiting bitcoin and other cryptos’ appeal to a significant swath of the population, as the vast majority of Indonesia’s population is Muslim — and thus, presumably, would take notice of the Council’s ban.
At the same time, crypto has found some favor within Indonesia, where the government has estimated that as many as 7.4 million Indonesians have held cryptos as of data tallied in July, worth about $33 billion – and the number of investors has doubled in a year.
The statements emanating from Indonesia come on the heels of concrete actions from nations such as China, where the groundwork is being definitively laid to launch a CBDC nationwide, amid a crackdown on privately issued cryptocurrencies.
Back in September, China announced through its central bank that all cryptocurrency-related transactions, including bitcoin, are illegal.
That ban is more sweeping, but builds on other crackdowns in the country on crypto, such as the May 2021 announcement that banking regulators banned financial institutions (FIs), including banks and payments companies, from providing services related to cryptocurrencies.
Those efforts smooth the way for the People’s Bank of China to fill the arguable vacuum created by the ban with its digital yuan. In this way, China is creating a situation that echoes Agung’s comments that populations would find the CBDC to be more “credible” than cryptocurrencies.
India looms as another large market that seems well on the way to bringing a digital currency to the national stage, at the expense of cryptocurrencies. That government is on track to present a bill in the upcoming winter session of Parliament that paves the way for CBDC issuance, presumably at the expense of private cryptos.
The bill will reportedly be titled The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. The directives of that legislation would look to create a framework for the digital currency while at the same time prohibiting cryptos — with the notable exception of cryptos that help promote blockchain.
The wagons are circling as central banks take aim at cryptos, with CBDCs as an arrow in the quiver.