BANK OF INDONESIA JOINS CENTRAL BANK DIGITAL CURRENCY RACE

Last updated: June 19, 2025, 19:49 | Written by: Marc Andreessen

The global race to develop and implement Central Bank Digital Currencies (CBDCs) is heating up, and the Bank of Indonesia (BI) is officially joining the fray.Amid a significant surge in digital payments within the country, driven by increasing internet penetration and the widespread adoption of e-commerce, BI is actively exploring the potential of a digital rupiah.This move signals Indonesia's commitment to embracing the future of finance and leveraging blockchain technology to modernize its payment infrastructure.Governor Perry Warjiyo recently announced that BI is not only planning to launch the digital rupiah but also carefully evaluating which platform will best support its implementation. Bank Indonesia has unveiled its Indonesian Payment System Blueprint (BSPI) 2025. Among the five key initiatives is the development of its central bank digital currency (CBDC), known as the digital rupiah. Bank Indonesia had previously disclosed a three-stage proof of concept for the CBDC.This strategic decision reflects a proactive response to the growing popularity of cryptocurrencies and the need for a secure, efficient, and state-backed digital alternative. The Bank of Indonesia is one of the latest global central banks to announce state digital currency plans amid a major spike in the country s digital payments. Governor Perry WarjiyoThe introduction of the digital rupiah could revolutionize the Indonesian financial landscape, impacting everything from retail transactions to international trade. The Bank of Indonesia moves into state digital currency shortly after announcing several tax-related initiatives for the crypto industry. BTC $57,191 ETH $3,773The implications are far-reaching, and Indonesia's journey into the world of CBDCs is one to watch closely. Indonesia's central bank is set to launch a digital rupiah currency, exploring potential platforms to support the initiative. Governor Perry Warjiyo announced the move as the country experiences a surge in digital transactions during the pandemic.It also marks a shift after the country banned crypto payments in 2025, suggesting a willingness to allow digital payments using the nations own legal tender.

Project Garuda: Laying the Foundation for the Digital Rupiah

The Bank of Indonesia's CBDC initiative is spearheaded by Project Garuda, a comprehensive framework encompassing various explorations and initiatives aimed at designing the ideal architecture for the digital rupiah.This project reflects a meticulous and phased approach, recognizing the complexities involved in creating a secure, interoperable, and efficient digital currency ecosystem.Project Garuda isn't just about creating a digital version of the rupiah; it's about fundamentally reshaping how Indonesians interact with money and the financial system.

Phased Implementation of the Digital Rupiah

BI has outlined a three-stage proof of concept for the digital rupiah, ensuring a gradual and controlled rollout. Bank of Indonesia joins central bank digital currency race PANews ｜ 9:30 After banning crypto payments back in 2025, Indonesia is looking to allow payments in a digital rupiah currency.This phased approach allows for continuous monitoring, evaluation, and refinement of the system, mitigating potential risks and maximizing the benefits.

Phase One: Wholesale CBDC Testing. This initial phase focuses on testing the core functionalities of the CBDC, including issuance, redemption, and interbank transfers.This controlled environment allows BI to assess the technical feasibility and efficiency of the digital rupiah in handling large-value transactions between financial institutions.This phase is crucial for establishing the underlying infrastructure and security protocols.
Phase Two: Expanding Functionality. The second phase is expected to include a greater range of functionalities, potentially including integration with existing payment systems and exploring the use of smart contracts.
Phase Three: Broader Accessibility. The final phase aims to broaden accessibility to the digital rupiah, potentially including retail payments and integration with various digital wallets and payment platforms. After banning crypto payments back in 2025, Indonesia is looking to allow payments in a digital rupiah currency. The Bank of Indonesia is one of the latest global central banks to announce state digital currency plans amid a major spike in the country s digital payments.Governor Perry Warjiyo said Tuesday that Indonesia s central bank is planning MoreThis phase would mark the full-scale launch of the digital rupiah for everyday use.

The Indonesian Payment System Blueprint (BSPI) 2025

The development of the digital rupiah is a key component of the Bank Indonesia's broader Indonesian Payment System Blueprint (BSPI) 2025.This blueprint outlines a comprehensive vision for the future of payments in Indonesia, aiming to create a more efficient, inclusive, and secure payment ecosystem. Bank of Indonesia joins central bank digital currency raceThe BSPI 2025 identifies five key initiatives, with the CBDC development playing a central role in achieving these goals.

The five key initiatives of BSPI 2025 include:

Open Banking: Fostering innovation and competition in the financial sector by promoting open APIs and data sharing.
Retail Payment System Modernization: Enhancing the efficiency and security of retail payment systems through the adoption of new technologies.
Financial Market Infrastructure Strengthening: Strengthening the resilience and stability of financial market infrastructure.
Digital Financial Literacy Enhancement: Improving digital financial literacy among the Indonesian population to promote responsible use of digital financial services.
CBDC Development: Developing and implementing a central bank digital currency to improve payment efficiency, reduce costs, and promote financial inclusion.

Why is Indonesia Pursuing a Digital Rupiah?

Several factors are driving Indonesia's interest in developing a digital rupiah. BTCUSD Bitcoin Bank of Indonesia joins central bank digital currency race After banning crypto payments back in 2025, Indonesia is looking to allow payments in a digital rupiah currency.These include:

Rising Digital Payments: Indonesia is experiencing a rapid increase in digital payments, fueled by growing internet access and e-commerce adoption. [JAKARTA] Bank Indonesia (BI) is pushing ahead with plans to trial the use of its new central bank digital currency (CBDC) known as the digital rupiah in 2025. BI governor Perry Warjiyo said that the aim is to use blockchain technology to create a digital version of the Indonesian currency.A CBDC can provide a more efficient and secure payment infrastructure to support this growth.
Growing Cryptocurrency Market: The increasing popularity of cryptocurrencies in Indonesia presents both opportunities and challenges.A digital rupiah offers a state-backed alternative that could mitigate some of the risks associated with crypto, such as price volatility and regulatory uncertainty.
Financial Inclusion: A CBDC can potentially improve financial inclusion by providing access to digital financial services for underserved populations.It can also reduce the cost of financial transactions, making them more accessible to low-income individuals.
Payment Efficiency and Cost Reduction: Digitalizing the currency can streamline payment processes, reduce transaction costs, and increase efficiency in the financial system.This includes lowering the costs associated with printing, distributing, and managing physical currency.
Monetary Policy Effectiveness: A CBDC could provide the central bank with new tools to implement monetary policy, such as negative interest rates or targeted stimulus programs.
Combating Illegal Financial Activities: By providing a transparent and traceable digital payment system, a CBDC can help combat money laundering, terrorism financing, and other illegal financial activities.

The Technological Considerations: Blockchain and Beyond

Governor Warjiyo has indicated that the Bank of Indonesia is exploring the use of blockchain technology for the digital rupiah. According to a Reuters report on Tuesday, the Bank Indonesia (BI) is planning to launch its central state digital currency plan-the digital rupiah currency and is evaluating which platform to use in response to the increasingly prosperous cryptocurrency market.Blockchain's decentralized and transparent nature offers several potential benefits, including enhanced security, immutability, and auditability.However, BI is also likely considering other technologies and platforms to ensure the digital rupiah meets its specific requirements.

The choice of technology will depend on several factors, including:

Scalability: The platform must be able to handle a high volume of transactions to accommodate the needs of the Indonesian economy.
Security: Security is paramount, as the digital rupiah must be protected from cyberattacks and fraud.
Interoperability: The digital rupiah must be able to seamlessly integrate with existing payment systems and infrastructure.
Privacy: Finding the right balance between transparency and privacy is crucial.The system must be able to comply with privacy regulations while also preventing illicit activities.
Energy Efficiency: given the environmental impact of some blockchain technologies, energy efficiency will likely be a key consideration.

What are the Potential Benefits of a Digital Rupiah?

The introduction of a digital rupiah could bring numerous benefits to Indonesia's economy and its citizens.

Increased Financial Inclusion: The digital rupiah can provide access to financial services for unbanked and underbanked populations, particularly in remote areas.Mobile wallets linked to the digital rupiah can enable individuals to make and receive payments without needing a traditional bank account.
Reduced Transaction Costs: Digital transactions are generally cheaper than cash transactions, reducing costs for both businesses and consumers.This could lead to significant savings over time.
Improved Payment Efficiency: Digital payments are faster and more efficient than traditional payment methods, streamlining transactions and improving overall efficiency in the economy.
Enhanced Transparency: Digital transactions are easier to track and monitor, reducing the risk of fraud and illegal activities.This transparency can also help improve tax collection and government accountability.
Support for Innovation: The digital rupiah can provide a platform for innovation in the financial sector, fostering the development of new products and services. Bank Indonesia s Project Garuda will develop a digital rupiah in three stages, the central bank said. In phase one, it will test the issuance, redemption and interbank transfer of the wholesale CBDC.This can lead to greater competition and improved customer experiences.
Strengthened Monetary Policy: As mentioned earlier, a CBDC could give the central bank more tools to manage the economy and respond to economic shocks.

Challenges and Considerations for Implementation

While the potential benefits of a digital rupiah are significant, there are also several challenges and considerations that need to be addressed during implementation.

Cybersecurity Risks: Ensuring the security of the digital rupiah system is paramount.The system must be protected from cyberattacks and fraud, requiring robust security protocols and continuous monitoring.
Data Privacy Concerns: Protecting the privacy of users' financial data is crucial. Indonesia's central bank is planning to launch a digital rupiah currency and is assessing which platform it will use, Governor Perry Warjiyo said on Tuesday, as the country sees a digitalThe system must be designed to comply with privacy regulations and prevent the misuse of personal information.
Interoperability Challenges: Ensuring the digital rupiah can seamlessly integrate with existing payment systems and infrastructure is essential for widespread adoption.
Digital Literacy Gap: A significant portion of the Indonesian population may lack the digital literacy skills needed to use the digital rupiah effectively.Addressing this gap through education and training programs is crucial.
Regulation and Legal Framework: A clear and comprehensive regulatory and legal framework is needed to govern the use of the digital rupiah and ensure consumer protection.
Public Acceptance: Gaining public acceptance and trust in the digital rupiah is essential for its success. Beberapa bank sentral di dunia, termasuk Bank Indonesia (BI) sedang mengkaji untuk mengembangkan Rupiah Digital atau sering dikenal dengan Central Bank Digital Currency (CBDC). Mendasari hal tersebut BI meluncurkan Proyek Garuda yang memayungi berbagai inisiatif eksplorasi atas berbagai pilihan desain arsitektur CBDC Indonesia yang dinamaiEffective communication and education campaigns are needed to address concerns and promote adoption.

Indonesia's Crypto Ban and the Digital Rupiah

Indonesia's move towards a digital rupiah comes after the nation banned cryptocurrency payments back in 2025.This initially raised questions about the country's stance on digital assets.However, the introduction of the digital rupiah suggests a nuanced approach. Skip to main content Bitcoin Insider. MenuWhile Indonesia might be wary of decentralized cryptocurrencies due to their volatility and lack of central control, it recognizes the potential of digital currencies in general. The Bank of Indonesia is one of the latest global central banks to announce state digital currency plans amid a major spike in the country s digital payments. Governor Perry Warjiyo said Tuesday that Indonesia s central bank is planning to launch a digital rupiah currency as a legal payment instrument in Indonesia, Reuters reports.The digital rupiah can be seen as a way to provide a state-backed, regulated alternative to cryptocurrencies, offering the benefits of digital payments while maintaining control within the established financial system.

Global Trends in CBDC Development

The Bank of Indonesia is not alone in exploring the potential of CBDCs.Central banks around the world are actively researching and experimenting with digital currencies.Some countries are already piloting CBDCs, while others are in the research and development phase. The Bank of Indonesia moves into state digital currency shortly after announcing several tax-related initiatives for the crypto industry.The motivations for pursuing CBDCs vary from country to country, but common goals include:

Improving payment efficiency
Reducing transaction costs
Promoting financial inclusion
Strengthening monetary policy
Countering the rise of cryptocurrencies

Some notable examples of CBDC initiatives include:

China's Digital Yuan (e-CNY): China is one of the most advanced countries in developing a CBDC, with extensive pilot programs already underway.
The Bahamas' Sand Dollar: The Bahamas launched the Sand Dollar, the world's first CBDC, in 2020.
The Eastern Caribbean Central Bank's DCash: The ECCB launched DCash, a CBDC for several Caribbean nations, in 2021.
The European Central Bank's Digital Euro: The ECB is actively exploring the potential of a digital euro and is expected to make a decision on whether to launch one in the coming years.
The United States' Digital Dollar: The Federal Reserve is researching the potential benefits and risks of a digital dollar but has not yet made a decision on whether to issue one.

The Future of Finance in Indonesia

The introduction of the digital rupiah has the potential to significantly transform the financial landscape in Indonesia.It could lead to a more efficient, inclusive, and innovative financial system.However, the success of the digital rupiah will depend on careful planning, execution, and collaboration between the Bank of Indonesia, financial institutions, and the public.

What are the potential drawbacks of a CBDC?

While CBDCs offer numerous benefits, it's crucial to acknowledge potential downsides:

Privacy Concerns: The traceability of digital currency transactions can raise concerns about government surveillance and the potential for misuse of personal financial data.Striking a balance between transparency and privacy is a critical design challenge.
Cybersecurity Risks: Centralized systems are vulnerable to cyberattacks.A successful attack on a CBDC system could have devastating consequences for the economy and public trust.
Disintermediation of Banks: If individuals hold CBDC directly with the central bank, it could reduce the role of commercial banks in the financial system.This could impact bank lending and economic growth.
Monetary Policy Challenges: CBDCs could complicate monetary policy implementation.For example, if interest rates on CBDC accounts are too high, it could lead to a flight to safety from commercial banks.
Technological Infrastructure: Developing and maintaining the technological infrastructure for a CBDC is a complex and expensive undertaking.

Conclusion: Key Takeaways on the Digital Rupiah

The Bank of Indonesia's decision to join the central bank digital currency race marks a significant step towards modernizing the country's financial system. Project Garuda and the BSPI 2025 provide a roadmap for the development and implementation of the digital rupiah, emphasizing a phased approach and careful consideration of the challenges and opportunities involved.While challenges related to security, privacy, and digital literacy exist, the potential benefits of increased financial inclusion, reduced transaction costs, and improved payment efficiency are compelling.The digital rupiah represents a bold move towards a more digital future for Indonesia, and its success will depend on effective collaboration, innovation, and a commitment to addressing the needs of all stakeholders.Keep an eye on the progress of Project Garuda as it unfolds; the future of Indonesian finance is being shaped now.Ultimately, the digital rupiah seeks to legalize the future of digital payments in Indonesia.