Digital Rupiah Issuance 2024, Explanation from BI Boss

Jakarta, CNBC Indonesia - Bank Indonesia (BI) is set to boost digital payment systems in the
country. One of them is through the development of Digital Rupiah as the only legitimate digital
payment tool. BI Governor Perry Warjiyo at the 2023 Annual BI Meeting (PTBI) stated that the
issuance of the road map or the first phase roadmap of Digital Rupiah would be conducted next
year. At the very least, BI will create prototypes to test ideas or concepts of software
development as the backbone of Digital Rupiah. This stage is called "proof of concept".
Within it, BI will build the 'Digital Rupiah Treasury', a platform accessible by selected banks and
non-banks or called 'wholesalers' and 'retailers'.Wholesale Digital Rupiah (w-Digital Rupiah) has
limited access coverage and is only distributed for wholesale transaction settlements such as
monetary operations, foreign exchange market transactions, and money market
transactions.Meanwhile, Retail Digital Rupiah (r-Digital Rupiah) has open access coverage to the
public and is distributed for various retail transactions both in the form of payment transactions
and transfers, by individuals or businesses (merchants and corporations). To understand the
concept of digital rupiah, the public needs to understand the difference between digital rupiah
and digital wallets or cryptocurrencies. Here's the explanation:
1. The difference between digital rupiah, bitcoin, and e-wallets
Currently, there are many digital payment instruments available in Indonesia. For example,
electronic payments through digital wallets (e-Wallet) such as GoPay, Ovo, Dana, etc.
In addition, there are also digital money instruments that are widely used for investment, such
as cryptocurrencies.
The fundamental differences can be seen from the authority issuing the money, format,
security guarantees, customer identity transparency, transaction recording structures, and
risks.
Digital Rupiah is a Central Bank Digital Currency (CBDC) developed by BI. The concept of CBDC
itself has been adopted by central banks in several countries in recent years.
According to a report released by Deloitte, CBDC is the response of global monetary institutions
to technological developments in the financial sector. One of them is the high interest of the
public in cryptocurrencies and other digital payment instruments.
CBDC is considered an innovation in the digital financial sector, so that money circulation in
society can be more effective and efficient, but its security is maintained because it is protected
by legitimate financial authorities in each country.
Digital wallets platforms popularly used by Indonesian society such as GoPay, Ovo, Dana, etc.,
are essentially physical paper and metal money distributed through digital platforms.
Digital wallets are different from currencies because their portion is only used for storage. Just
like storing in mobile banking provided by each bank.
The difference is, more 'modern' digital wallets can be used to perform many transaction
instruments through one gateway. Starting from ordering food, transportation services, to
investing in one application.
Meanwhile, Digital Rupiah is money that is truly issued virtually and stored through digital
platforms. Digital Rupiah cannot be withdrawn in physical form.
Its recording structure is also different. Physical money, even if stored in a digital wallet, uses a
recording method with a centralized manual system.
This means that the transaction history of money can only be known by the authorities issuing
the money and the parties conducting the transactions.
Meanwhile, Digital Rupiah uses both centralized and decentralized structures. Its recording is
real-time and more transparent, so that the transaction history of money movements can be
recorded by the system automatically.
This is made possible by the use of blockchain technology in Digital Rupiah, similar to that used
in cryptocurrencies. The difference is, Digital Rupiah is issued by legitimate financial authorities,
so it is protected by law and safer.
Meanwhile, cryptocurrencies circulating so far are developed privately. Its recording structure is
completely decentralized, but not transparent in terms of customer identity.
As a result, although the transaction recording of money is recorded in real-time, the value of
money tends to be volatile because customer identities can be made anonymous.
Private development without the intervention of legitimate authorities also allows
cryptocurrencies to be more controlled by algorithms.
2. Digital Rupiah Roadmap
BI has defined that the development of national digital economy and finance (EKD) aims to
support sustainable economic growth. The use of technology will increase the volume and
frequency of digital payment transactions.
In addition, stable, modern, secure, and reliable payment infrastructure and money markets
according to international standards can also be implemented.
Currently, BI is formulating a proof of concept for the issuance of Digital Rupiah, after the
conceptual design has been published and received input from the industry and the public.
The Digital Rupiah wholesaler business model will be pursued, so that BI as the central bank will
focus more on issuing and distributing the virtual currency through the Digital Rupiah Treasury
to be built.
Then, the utilization for retail transactions by the public will be entrusted to selected banks and
non-banks in the future. Currently, BI is also conducting studies for selecting compatible
platforms.
Simply put, in the first phase, the Garuda Digital Rupiah Project will begin with 'wholesale-
CBDC' for issuance, destruction, and inter-bank transfers.
In the second phase, wholesale-CBDC will be expanded to support monetary operations and
financial market development.
Then, in the third phase, wholesale-CBDC will interact with retail-CBDC end-to-end or be
utilized by the general public for daily transaction needs.