Bank Indonesia, the central banking regulator of Indonesia, has announced the launch of a consultation process for its central bank digital currency (CBDC) initiative, known as Project Garuda.
Local news publication Tempo reported that Bank Indonesia’s consultative process is aimed at obtaining feedback from industry stakeholders in order to prepare for a full-scale CBDC launch.
Bank Indonesia expects proof of concept in July
“We have published a consultative paper and met with big players whom we consider capable, and inshallah, we will issue a proof of concept around July. We will also push for the downstream project of the government and several other policies,” said Bank Indonesia Governor Perry Warjiyo.
The central bank has also confirmed that the discussions will strictly target their whole CBDC, leaving a retail version in development. Warjiyo added that with a CBDC, Indonesia will be able to establish a more inclusive financial system, deepen money markets, and take advantage of distributed ledger technology.
According to Bank Indonesia, the development of the digital rupiah will take place in three phases: immediate, intermediate, and final. Each of these phases will start with public consultations (consultative paper and focus group discussions), followed by technological experimentation and piloting or sandboxing. All phases will conclude with a review of the policy stance.
Designing Project Garuda
Bank Indonesia issued a white paper in November 2022 outlining the high-level design for Digital Rupiah under Project Garuda, as well as initiated public communication regarding the development plan for the currency.
In the paper, Warjiyo said that the issuance of a CBDC requires thoughtful consideration and a balance between the benefits and risks associated with it. Central banks have a huge role to play in this respect, and the design of any CBDC needs to take into account public interest and what roles central banks can perform.
The paper highlighted the importance of CBDC’s role in supporting financial inclusion, especially for emerging markets and developing economies through certain features such as offline functionality, low transaction cost, and capabilities in reaping the benefits from data granularity.
Bank Indonesia also noted that the CBDC’s ability to meet interconnectivity, interoperability, and integration (3i) aspects with existing payment systems (including in cross-border contexts) and other financial market infrastructures, would be vital for a successful launch.
The paper also recognizes the roles of both central banks and the market players in developing a cross-sectoral ecosystem where both parties can interact, collaborate, and contribute to the development of the CBDC.