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Indonesia to ban fintech companies from using digital currencies

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Indonesia to ban fintech companies from using digital currencies

Bank Indonesia will ban financial technology companies from using digital currencies on their platforms, as part of new rules requiring digital system providers to obtain a central bank license, Bloomberg News and Reuters reported Dec. 7, citing Deputy Governor Sugeng.

The new rules, which will take effect Jan. 1, 2018, aim to ensure that digital currencies are not used in payment transactions. The move also backs Governor Agus Martowardojo's previous statement that bitcoin is not considered legal tender in the country and that digital currencies could be used in money laundering and terrorist financing.

The rules were signed in November, but were only made public on Dec. 7.

The curb does not apply to trading of virtual currencies, which is not regulated in Indonesia. However, Rosalia Suci, head of the bank's legal department, said the regulator "continues to look into" the possibility of regulating virtual currency exchanges.

The definition of fintech companies to be regulated by the central bank will include payment systems, market support, investment management or risk management, peer-to-peer lending, financing providers and other financial services. The bank also aims to ensure that these companies have tools to oversee and guard monetary policy stability, and test their products in a regulatory sandbox before issuing a license.

Bank Indonesia first warned against using digital currencies in 2014, and proceeded to ban payment system service providers from processing transactions using such currencies in 2016.