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View all search resultsInsurance industry should anticipate drawbacks of digital currencies
The decrease in loan disbursements resulting from CBDC implementation may directly impact the insurance industry, particularly in terms of reduced credit insurance premiums.
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Digital assets:Indonesia’s leading regulated cryptocurrency exchange,Tokocrypto,has secured investment from global blockchain company Binance.
The rapid advancement of the digital world has driven the adoption of technology in various sectors, including in the use of crypto assets and other digital currencies that aim to replicate traditional fiat money. As a result, central banks around the world, including in Indonesia, have introduced the concept of a central bank digital currency (CBDC) as a centralized digital currency, accommodating the evolving behavior of society.
Bank Indonesia (BI) says that the digitalization of the economy has shifted people's preferences toward financial services that are faster, easier, cheaper, more secure and more reliable. With internet penetration reaching 74 percent, 98 percent of transactions being conducted digitally and 59 percent of the population utilizing digital financing, there is already a solid foundation for developing the CBDC framework.
Under the Garuda Initiative, BI is actively exploring the design of the Indonesian CBDC, known as the Digital Rupiah. This project complements BI’s various initiatives in promoting the national digital transformation agenda, specifically the integration of the digital economy and finance in an end-to-end manner. These efforts are currently being advanced through the 2025 Indonesian Payment System Blueprint (BSPI 2025) and the 2025 Money Market Development Blueprint.
In a multilateral setting, BI is also engaged in initiatives during Indonesia’s ASEAN chairmanship in 2023 and in the Group of 20 presidency in 2022 to promote CBDCs in response to the widespread adoption of private digital currencies. This has prompted BI to reformulate its 2020-2025 Vision, aiming to become the leading digital central bank, to make a tangible contribution to the national economy and to set the benchmark among emerging market countries.
The implementation of CBDCs will have an impact on the monetary sector and the economy as a whole. According to BI (2022), CBDCs complement physical currencies by enabling faster circulation and contributing to the funding needs of development. The ability to create and change monetary policy will be accelerated, allowing policy actions to have a more significant impact.
However, the hypothetical influence of this policy on the financial sector, particularly the insurance industry, may not always be positive. It will need to go through several stages in the transmission mechanism.
Firstly, BI will need to determine whether CBDCs will have an interest rate or not. Despite their lack of official recognition as a means of payment, the high returns and rapid development of cryptocurrencies such as Bitcoin and Ethereum have been remarkable.
