Jakarta. Bank Indonesia will impose heavy sanctions on any payment system providers that facilitate financial transactions in cryptocurrencies, an official said on Monday (16/01).
The central bank previously forbade banks, financial services, electronic wallet providers, payment service providers and financial technology companies from processing any cryptocurrency payments. There are fears that such virtual currencies have been forming bubbles due to the lack of control by responsible authorities and the absence of underlying asset backing, which can affect financial stability and cause social harm.
"We affirm that we will summon and impose stern sanctions [on anyone that violates the rule]. There are already four regulations that prohibit use of cryptocurrencies," Eni Panggabean, head of Bank Indonesia's risk management department, said, as quoted by Investor Daily.
These regulations include a 2011 law on the rupiah as the national currency and a 2015 central bank regulation on the obligation to use the rupiah. Bank Indonesia also issued a regulation in 2017 to protect consumers performing transactions on financial technology platforms.
The most detailed instruction is a 2016 Bank Indonesia regulation that forbids conventional banks and other nonbank payment companies from processing payments in cryptocurrencies. The regulation goes as far as explicitly banning Bitcoin and rivals, such as Ethereum, Dash, Litecoin and Ripple, from being used in transactions.
Institutions that break this rule will be fined and even risk losing their operating licenses.
Bank Indonesia will cooperate with the Financial Services Authority (OJK), Futures Exchange Supervisory Board (Bappebti) and other related institutions to enforce regulations on cryptocurrencies.
Onny Widjanarko, head of Bank Indonesia's payment system policy department, said virtual currencies pose a serious risk to the financial system as they do not comply with international standards that ensure security, while they also do not offer any legal assurances in case of loss.
Tokyo-based Bitcoin exchange Mt. Gox collapsed in 2014 after hackers stole 650,000 Bitcoins, triggering a collapse in the price of the cryptocurrency.
The downfall of Mt. Gox left more than 24,000 customers unable to access hundreds of millions of dollars in cryptocurrency and cash. None has managed to retrieve a cent, more than three years later.