Reports of a Bank of Indonesia crackdown on bitcoin payments have largely obscured the fact that the Indonesian Financial Services Authority (Otoritas Jasa Keuangan – OJK) has actually been encouraging rural financial institutions to implement blockchain technologies into their operations. This is a bid to encourage them to make greater use of technology so that they and their clients can better connect to higher-level financial services in the country.
Subscribe to the Bitsonline YouTube channel for great videos featuring industry insiders & experts
Blockchain Seen as Key to Reviving a Declining Local Banking Sector in Indonesia
Roberto Akyuwen, an executive analyst to the senior deputy commissioner of Banking Oversight, said that the use of technology was a must to People’s Credit Banks so that they can become more competitive within the financial services industry and support their existing core banking services.
He explained that almost every two weeks a People’s Credit Bank (BPR) has its operating licence revoked, usually for failing to provide a sufficiently competitive level of service to consumers.
For this reason, he says that, “the arrival of blockchain technology can be a useful tool in increasing the operational abilities of these financial institutions”.
Pandu Sastrowardoyo, chairwoman of Blockchain Zoo, a blockchain consulting and training firm in Indonesia, said that they have been asked by the Financial Services Authority to assist these local financial institutions to implement blockchain technologies to support their operations.
She said, “it’s a request by the Financial Services Authority. If they are asking us to do this then of course we will assist.”
“Blockchain Zoo is happy to assist the Financial Services Authority to help increase the SLAs of government banks, whether regional or rural. We chose to be based in Bali to link up our international expertise with local developers, companies, and organizations; we’re certain that Blockchain Zoo can bring value to the Indonesian government as well.”
Financial Services Authority Encourages Innovation – Bank of Indonesia Ensures Compliance
So while it appears from the outside that the Bank of Indonesia is cracking down on bitcoin, in fact they are merely enforcing the requirement that Indonesian rupiah be used at the point-of-sale. Rather than a “crypto crackdown” as some have been calling it, it’s more accurate to call it a payment enforcement effort on the part of the central bank.
While the Financial Services Authority on the one hand offers a carrot to encourage financial institutions to innovate, on the other hand, the Bank of Indonesia wields the stick to be sure that the law is being followed. However, both institutions report to the government, one is focused on the risks, while the other is focused on innovation.
However this doesn’t mean the Financial Services Authority is in any way encouraging cryptocurrency transactions in the country — it’s a recognition on their part that there is much more to blockchain technologies than just cryptocurrencies.
To support blockchain and cryptocurrency innovation in Indonesia, a group of companies have come together to form the Indonesian Blockchain Association (Asosiasi Blockchain Indonesia) to work together in lobbying and educating the government about these technologies, and opening up the discussion to include these companies and their millions of customers in the country.
So while the outside view may suggest a doom and gloom scenario, the view on the inside suggests a normal process of innovation and regulatory review.
What do you think about the approach of using blockchain but not cryptocurrency within the banking sector? Let us know in the comments.
Images via Pixabay