Bank Indonesia has reiterated its warning against speculation in cryptocurrencies for fear that a bubble could destabilize the country's financial sector. (Reuters Photo/Dado Ruvic)

Bank Indonesia Urges Indonesians to Avoid Cryptocurrency Trading

JANUARY 13, 2018

Jakarta. Bank Indonesia has reiterated its warning against speculation in cryptocurrencies for fear that a bubble could destabilize the country's financial sector.

"Ownership of virtual currency is highly risky and full of speculation, because there is no single responsible authority, official administrator, nor underlying asset backing the virtual currency, which puts it at risk of forming a bubble, and because it is prone to be used in money laundering and terrorism financing, all of which make it capable of affecting financial stability and harming society," Bank Indonesia spokesman Agusman said in a statement on Saturday (13/01).

The central bank said cryptocurrencies are not legal tender in Indonesia and cannot be used in transactions.

Bank Indonesia does not allow banks, financial services, electronic wallet providers, payment service providers and financial technology companies to process any cryptocurrency payments.

While the bank stopped short in the statement from outright banning cryptocurrency trading in the country, it urged Indonesians not to own, acquire or trade in it.

Bit Coin Indonesia, the company behind – the country's largest cryptocurrency exchange – has yet to respond to the Jakarta Globe's request for comment on the central bank's warning.

However, the company did post a warning on its website reminding traders about extreme volatility in cryptocurrency trading.

The price of Bitcoin has risen sharply over the past year, gaining more than 2,000 percent in value against the rupiah. However, the cryptocurrency currently trades 26 percent below its all-time high a month ago.

The statements rehashed the local monetary authority's enmity to cryptocurrencies.

Bank Indonesia Governor Agus Martowardojo said during the institution's annual meeting last month that transactions in virtual currencies present "arbitrage opportunities, unhealthy business practices and business control by parties outside the legal reach of Indonesia that could damage our industry structures."

Bank Indonesia issued a regulation in 2016 forbidding conventional banks and other nonbank payment companies from processing payments in cryptocurrencies. The regulation went as far as explicitly banning Bitcoin and rivals, such as Dash, Litecoin and Ripple, from being used in financial transactions.

Institutions that violate this rule are subject to fines and may even forfeit their operating permits.

Last year, the Financial Services Authority (OJK) closed down four investment funds – Dunia Coin Digital, Dinar Dirham Indonesia, Tracto Venture Network Indonesia and Purwa Wacana Tertata – for accepting money from the public to invest in cryptocurrencies.