Indonesia’s Digital Rupiah: Latest Addition to CBDCs

Digital Rupiah


Bank Indonesia’s Governor, Perry Warjiyo, on the 5th of December 2022, announced Indonesia’s plans to develop the country’s first Central Bank Digital Currency (CBDC).
Dubbed Project Garuda, the Digital Rupiah will be rolled out in three phases.
A central bank backed Digital Currency such as the Indonesian Digital Rupiah will undoubtedly guarantee an acceleration of CBDC rollout in the rest of Asia.


With China being the largest economy in Asia, and soon to be largest economy worldwide, and Indonesia standing as the largest economy in South East Asia, the turn to digital fiat use in both countries will set a solid foundation for confidence in digital currency use. 


With public interest in decentralized Digital Currencies increasing, such as cryptocurrency, as an answer to the limitations on traditional fiat currency in an increasing digital  world, an official turn to a Central Bank Digital Currency by Indonesia comes at a decisive time.


Is the Digital Yuan Cryptocurrency?


Is Digital Rupiah A Cryptocurrency?


The Digital Rupiah is not cryptocurrency. However, according to the Digital Rupiah White Paper, a small portion of Digital Rupiah transactions maybe facilitated on DLT (Distributed Ledger Technology). Blockchain technology that facilitates cryptocurrency transactions is also a variation of DLT. It requires no authority or permissions.


For this reason, at least 40% of all cryptocurrency transactions are associated with illicit activity.
A nation cannot afford the possibility of abuse of their local digital currency. Cases of money laundering, or terrorist financing cannot be easily detected on decentralized DLT transaction systems. This poses a great threat to national security.


Security and regulation of digital currency transactions is of utmost importance.
Therefore it is clear that the priorities of CBDCs, like the Digital Rupiah, are different and cannot be provided by DLT alone.


According to the White Paper released by Bank Indonesia even “…permissioned DLT is regarded insufficient to facilitate high-volume retail transactions.” DLT allows very little scalability in both volume and speed for retail settlements.


The Digital Rupiah is not a Cryptocurrency at all. The final authority on all Digital Rupiah transactions will be Bank Indonesia.


In 2017, the government of Indonesia imposed a blanket ban on all cryptocurrency transactions.


Features of Indonesia’s Digital Rupiah


The Digital Rupiah infrastructure will be “integrated, interconnected, and interoperable” with other CBDCs according to the Bank of Indonesia. Governor Warjiyo affirms that both national and international collaboration is necessary for the successful development of the Digital Rupiah.


Although the Digital Rupiah is still in development, we can see its integral function in the increasingly digitized and fast-paced world of transactions. For about a decade, more and more people around the world have been turning to online transactions for the convenience that it provides. Since covid-19 lockdowns of 2020, online platforms as the primary mode of payment grew exponentially. For many, this will remain a habit. Because of this, the “Digital Rupiah will be able to emerge a more effective core instrument for Bank Indonesia in maintaining monetary and financial system stability in the digital era”


Digital Rupiah Function and Rollout


The Digital Rupiah will not be limited to retail transactions. The w-Digital Rupiah (wholesale) payment system will facilitate end-to-end Straight Through Processing (STP) of transactions. 


The Digital Rupiah development will prioritize fast, secure, resilient, interoperable, extensible, and flexible.
Indonesia’s CBDC will be extensible in accommodating new developments to the system’s features, functionalities, and services, making the Digital Rupiah future-proof (resilient to changing times).
Digital Rupiah transactions will not be carried out in one chunk. Rather, the process will be modular to allow more flexibility to allow easier configuration, making the currency interoperable.


The w-Digital Rupiah will connect to trading platforms on the front-end processing smart contracts, near real-time transactions, and collateral management.
In the middle, it will connect with the Central Counterparty (CCP) for the money market and foreign exchange market. The back-end will include digital securities to allow efficient transaction processing with a Delivery-versus-Payment (DvP) model.
This layout is intended to abbreviate the settlement and reporting process.

The Indonesian CBDC (Digital Rupiah) will be rolled out in 3 phases.


  • Phase 1 will see the issuance, redemption, and the interbank transfer of wholesale Digital Rupiah (w-Digital Rupiah).

  • By phase 2 w-Digital Rupiah will support financial market transactions e.g. the interbank money-market.

  • Phase 3 will handle end-to-end transactions between wholesale and retail Digital Rupiah users.


Balancing CBDC and Physical Fiat Currency


It is understood that an immediate nationwide adoption of a Digital Currency is impossible. Until this is achieved Digital and physical currencies will need to be used side-by-side.


The Digital Rupiah will be able to coexist with existing forms of money through cooperation between the Digital Rupiah platform and other Financial Management Infrastructure (FMI).
The integrated, interconnected, and interoperable nature of the Digital Rupiah will ensure “smooth and seamless convertibility” across different payment modes.


Digital Rupiah as a Tool of the Future


The Future of Digital Rupiah Development


The Digital Rupiah, much like the Digital Yuan, will encourage a much needed digitizing of fiat money. The printing, minting, and maintenance of fiat currency is a large expense on a country’s central bank. Resources needed for producing coins and notes, as well as replacing physical money lost in circulation can be completely avoided with the introduction of a Central Bank Digital Currency.


In this way, CBDCs provide the option of making the future of financial transactions faster, more efficient, more secure, and sustainable.
This step in the right direction by Bank Indonesia will certainly encourage other nations in the region to speed up nationwide switching to secure, centralized currency in countries in the region. 


What Is The Digital Yuan?