Indonesian central bank flags risks of cryptocurrencies

A collection of bitcoin, litecoin and ethereum tokens. "(Cryptocurrency) is not a legal medium of exchange," says Jakarta.
A collection of bitcoin, litecoin and ethereum tokens. "(Cryptocurrency) is not a legal medium of exchange," says Jakarta.PHOTO: BLOOMBERG

JAKARTA • Indonesia's central bank has issued a fresh warning about trading in cryptocurrencies such as bitcoin because of the risk of losses to the public and even a potential threat to the stability of the financial system.

Bank Indonesia (BI) has previously said cryptocurrencies were not recognised as a legal medium of exchange, meaning that they could not be used as a means of payment in Indonesia.

"The ownership of virtual currencies is high risk and prone to speculation because there is no authority which takes responsibility, there is no official administrator and there is no underlying asset to be the basis for the price," BI spokesman Agusman said in a statement issued late on Friday.

He said virtual currencies could also be used in money laundering and terrorism funding, and due to all these factors cryptocurrencies could have an impact on the stability of the financial system and could cause losses for society.

"(Cryptocurrency) is not a legal medium of exchange. We remind (people of) its risks. When the risks occur, the losses will be borne by the public. We are obliged to protect consumers and protect them from a bubble," Mr Agusman said by telephone yesterday.

Asked whether such statements from the authorities could stir panic among those who had already invested in cryptocurrencies, he said: "They didn't consult us when buying... Please help us make the people understand."

Indonesian authorities have been stepping up their warnings. BI last month issued a regulation banning the use of cryptocurrencies by financial technology firms involved in payment systems, and said it is examining whether there is a need to regulate trading on virtual currency exchanges.

South Korean authorities last week sent global bitcoin prices temporarily plummeting and virtual coin markets into turmoil when Justice Minister Park Sang Ki said regulators were preparing legislation to halt cryptocurrency trading.

Prices later rebounded on the Luxembourg-based Bitstamp, with bitcoin standing at US$14,116 (S$18,680) in the latest trading after touching US$12,800 last week., an Indonesian online cryptocurrency exchange, said on its website that bitcoin was trading at 217.44 million rupiah (S$21,557) per unit.

Some Indonesian merchants, including an online babyware supplier, indicate on their websites that they accept payment in bitcoin.

Meanwhile, in Malaysia, the Subang Jaya Municipal Council in Selangor has put an end to bitcoin mining activities conducted illegally in two residential properties in Puchong town.


A version of this article appeared in the print edition of The Sunday Times on January 14, 2018, with the headline 'Indonesian central bank flags risks of cryptocurrencies'. Print Edition | Subscribe