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BI, FB open discourse on Libra cryptocurrency
Bank Indonesia (BI) sat down with several Facebook executives last week to allow the tech giant to explain its Libra cryptocurrency, as the central bank has a ban in place on using cryptocurrencies to make payments
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B
ank Indonesia (BI) sat down with several Facebook executives last week to allow the tech giant to explain its Libra cryptocurrency, as the central bank has a ban in place on using cryptocurrencies to make payments.
Facebook was not looking to obtain an operating permit in the near future for the Libra cryptocurrency project, BI director for payment systems policy Erwin Haryono said at a blockchain summit in Jakarta on Monday.
“We wanted to know what exactly they were making,” Erwin said. “As of now, they couldn’t say for sure if they would operate in Indonesia.”
The Libra cryptocurrency started making global headlines last month as it raised questions on data security, money laundering and consumer protection from policymakers across the world.
Indonesia, an important market for Facebook as the social media platform’s fourth-largest market with 130 million users, might be on the tech giant’s radar when it comes to launching Libra, Erwin added.
Around 9.5 percent of Indonesian internet users already own cryptocurrency, higher than the adoption rates in Singapore (6.4 percent), Malaysia (7.7 percent) and Vietnam (9.3 percent) but lower than Thailand (9.9 percent), according to a 2019 Hootsuite-We Are Social survey.
Cryptocurrency market capitalization in Indonesia alone hit US$4.86 million on Thursday, according to online cryptotrading platform Indodax. Bitcoin is the most popular currency with 52.72 percent volume share followed by Etherieum (7.9 percent) and Crypto.com Chain (4.8 percent).
“Libra created 100 percent backup coins — their terminology is ‘stable coin’. They are all encryptions on a computer but the big difference is Libra doesn’t create money. It’s like e-money,” said Erwin, recollecting Facebook’s explanation. “Meanwhile, early cryptocurrencies like Bitcoin, they create money out of nothing.”
Facebook declined to comment on its meeting with BI but acknowledged that the company was “engaging with regulators, policymakers and experts” over Libra.
“We know that the journey to launching Libra will be a long one and that we cannot do this alone,” a Facebook spokesperson told The Jakarta Post in an email on Thursday. “This was the whole reason that Facebook along with other members of the Libra Association shared our plans early.”
Signs began pointing to Facebook eying the Indonesian market when it publicly released in June its Libra whitepaper in nine languages, one of them being Indonesian. Even Arabic, which is one of six official United Nations languages, was excluded from the list.
Rico Rustombi, an official with the Indonesian Chamber of Commerce and Industry (Kadin), said that Kadin advocated for blockchain technology — including cryptocurrencies — because it would enable businesses to reduce transaction costs payable to financial institutions such as remittance fees, wire fees and ATM charges.
“These financial institutions are middlemen. There are commission fees and overnight waiting. In blockchain, there’s no such thing. Many big name institutions may lose their purpose,” he said.
It was precisely the potential collapse of “big name” financial institutions, particularly banks, from the decentralization of finance through cryptocurrencies that worried Bank Indonesia, Erwin said.
Financial Services Authority (OJK) data show that Indonesia is still heavily reliant on banks for loans, with Rp 7.97 quadrillion ($564.51 billion) in loans posted in May. In comparison, peer-to-peer lenders disbursed Rp 41.03 trillion and financing companies Rp 448.9 trillion in the same month.
Otherwise, Erwin said, BI remained open-minded to innovations that could drive financial inclusion in the country. He referred to the central bank launching last month a national standard QR code system that aimed to integrate the systems of all local e-wallet providers.
He said BI’s issued earlier this year the ban on cryptocurrencies for payments only because it went against the 2011 Currency Law, which stipulates all in-country transactions must be done in the rupiah.
He summarized Bank Indonesia’s stance on cryptocurrencies by paraphrasing Bank of England governor Mark Carney: “Have an open mind but not an open door.”
