Bank Indonesia has issued its second official statement regarding Bitcoin following its initial decision in January determining the virtual currency as an illegal and unsupported method of exchange. This time, the tone is no less stern but the central bank has essentially decided that it will not regulate Bitcoin. Any use by the consumers will be at their own risk.
Bank Indonesia deputy governor Ronald Waas said in January that Bitcoin violates at least three of the country’s laws but admitted that the bank has no authority to impose punishment or sanctions for anyone using the virtual currency, effectively leaving consumers to decide for themselves.
The statement, released today signed by Dr. Peter Jacobs, director of communications at Bank Indonesia, said that taking the currency laws of 1999, 2009, and 2011 into consideration, “Bank Indonesia is stating that Bitcoin and other virtual currencies are not currencies or legal tender in Indonesia. The people are urged to exercise caution towards Bitcoin and other virtual currencies. All risks regarding ownership/use of Bitcoin are borne by the owner/user of Bitcoin and other virtual currencies”.
So where does this leave Bitcoin, Dogecoin, Litecoin, and other virtual currencies with regards to their standings in Indonesia? Essentially this means people are actually free to own, trade, exchange, and use these crypto currencies as they wish, only that they will have no legal recourse when they stumble into situations such as fraud, or theft.
Amir Karimuddin last year questioned whether Bitcoin is a currency or a speculative commodity. At that point, one Bitcoin was suddenly worth over US$ 1000 after trading at around $ 200 one month prior. Frankly, there’s no reason why it can’t be both a currency and a commodity.
People hoard currencies all the time and the US dollar is prime example of that. Not so much as to accumulate wealth but to hedge against future changes in the value of the currency. US$ 1000 in February 2013 for example, was worth roughly Rp 9.7 million, whereas today it’s worth Rp 12 million. 1 Bitcoin (BTC) back in February 2013 was worth no more than U$ 25, but today it’s around $ 770. The extreme volatility of Bitcoin’s value does make it less viable as a currency at this point, more attractive as a commodity, and its rarity does present somewhat of an issue for those wishing to use it as a currency.
Other crypto currencies such as Litecoin, Dogecoin, Peercoin, and such may be more numerous than Bitcoin in terms of circulation but Bitcoin’s market capitalization, that is the value of the entire Bitcoin in current existence, dwarves all the other major crypto currencies combined. At the moment, according to bitinfocharts, a site that tracks the statistics of crypto currencies, there are 12.5 million Bitcoins in circulation, worth over US$ 9.5 billion, whereas Litecoin, the next most valuable crypto currency, is worth only around $500 million with 25 million Litecoins in circulation.
Will people keep using Bitcoin and its ilk? Of course they will. While crypto currencies may not be legal tender in many parts of the world, they are already being used regardless. They just haven’t yet gained enough recognition and have yet to provide the kind of security and confidence in themselves for the wider public to accept them. Of course, the world’s central banks will also continue to monitor the development and activities of crypto currencies and evaluate their viability in becoming legal tender.
[header image from Shutterstock]