Sebastian Sinclair

Crypto enthusiasts seeking sun and sand in one of Indonesia’s most popular tourist destinations have been warned against using digital assets as a form of payment.



Those using crypto to pay for accommodation, restaurants, activities or shopping will face stiff consequences, <a href="https://www.straitstimes.com/asia/se-asia/stop-paying-in-crypto-bali-governor-warns-foreign-tourists">local media reported</a>, quoting Bali’s governor Wayan Koster.



“Foreign tourists who behave inappropriately, do activities that are not allowed in their visa permit, use crypto as a means of payment and violate other provisions will be dealt with firmly,” he reportedly said.



Failing to comply will result in individuals being deported, sanctioned, criminally penalized and may also result in the closure of certain businesses, the governor added.



The use of foreign currencies for payment is also prohibited in Indonesia, as the only valid tender is the Indonesian rupiah.



According to <a href="https://www.kompas.id/baca/english/2023/05/26/cryptocurrencies-used-as-payment-method-in-bali">separate media reports</a>, crypto’s use as payment for certain goods and services has been on the rise in Seminyak, a major tourist hotspot to the south.



Koster has taken a tougher stance towards foreigners. Earlier this month, the governor proposed a &#8220;<a href="https://nasional.kompas.com/read/2023/05/05/05170051/buntut-wisman-nakal-pemprov-bali-bakal-terapkan-sistem-kuota-">quota system</a>&#8221; to control entry to the island due to concerns about tourist behavior.



The resort island has been attempting to walk a fine line by allowing tourists back to its shores in the post-COVID era, while managing the sudden influx of new visitors. 



Indonesia shut its borders to outsiders back in March 2020 and remained closed for nearly two years before opening up again slowly, beginning in February of last year. 



From 2020 to 2022, foreign tourism in Indonesia <a href="https://www.scmp.com/news/asia/southeast-asia/article/3199495/g20-summit-spotlights-bali-tourism-industrys-rise-again-collapse">fell over 75%</a> from pre-pandemic figures, severely impacting many tourism businesses.&nbsp;



In some cases, businesses, with support from Jakarta — the country&#8217;s capital, are leveraging digital assets, <a href="https://blockworks.co/news/web3-startup-helps-indonesias-tourism">specifically NFTs</a>, to boost investment and draw foreign interest.



In 2018, Indonesia acknowledged crypto as commodities, sanctioning their trading via centralized exchanges and allowing individual investors to legally hold the asset class.



Yet, according to 2019 and 2020 regulatory provisions, only <a href="https://www.cekindo.com/blog/cryptocurrency-indonesia#:~:text=Indonesia%20Recognizes%20Cryptocurrency%20as%20a,or%20Bappebti%2C%20published%20Regulation%20No.">229 such assets</a> are allowed for trade by entities that hold a license and comply with Bappetbi — Indonesia&#8217;s regulatory body for futures trading.



Crypto as a form of payment, meanwhile, is strictly prohibited.



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Bali Warns Tourists Against Using Crypto as a Form of Payment

Linda Adami, founder of Web3 and NFT startup Quantum Temple, is on a mission to preserve and promote cultural heritage through technologies based on an immutable ledger.



Through her startup, the 30-something-year-old entrepreneur is attempting to drive a rebound in Indonesia’s tourism sector, which has been plagued by the pandemic for three years.



“I believe there is a large untapped potential for blockchain applications and value creation for vital economic sectors, including tourism, education, real estate, retail, remote work, and healthcare among others,” Adami said.



Indonesia closed its borders to foreign tourists in March 2020 and, like most other countries, had been slowly reopening with various restrictions in place, for some time. While its borders are now wide open, the damage the pandemic wrought lingers.



Foreign tourist arrivals in Indonesia dropped by <a href="https://www.scmp.com/news/asia/southeast-asia/article/3199495/g20-summit-spotlights-bali-tourism-industrys-rise-again-collapse" target="_blank" rel="noreferrer noopener">more than 75%</a> from 2020 to 2022 compared to pre-pandemic levels, and many tourism businesses have struggled to stay afloat.



It’s the reason why the country’s tourism ministry has tapped Quantum Temple and others like it across a range of sectors to help drive fresh investment and get people back to its shores.



<h2 class="wp-block-heading">Value add</h2>



Indonesia’s digital economy reached a Gross Merchandise Value of roughly $77 billion in 2022, up 22 percent year on year, according to a <a href="https://services.google.com/fh/files/misc/indonesia_e_conomy_sea_2022_report.pdf" target="_blank" rel="noreferrer noopener">recent report</a> by Google, Temasek and Bain &amp; Company. That trend is expected to continue its course, reaching roughly $130 billion by 2025.



Muhammad Neil El Himam, deputy chairman for Digital Economy and Creative Products at the Ministry of Tourism and Creative Economy, told Blockwoks the e-commerce sector is driving the digital economy in Indonesia.



“To achieve the potential of the digital economy, of course, we need to apply the latest technologies, such as blockchain, Web3 and NFTs,” Himam said.



The thinking is that by storing cultural items on a blockchain, an incentive for artists, collectors, and other cultural sector stakeholders is created, opening new markets and the ability to reach a wider array of audiences than was previously possible.



Adami told Blockworks Indonesia&#8217;s cultural heritage — sometimes an afterthought in a globalized world — is at risk due to a lack of investment, access to finance, digital transformation and global distribution.&nbsp;



That, in turn, threatens the livelihoods of heritage practitioners, particularly young women under 35 in rural areas. The creative and handmade sector is the second-largest employer globally after agriculture, according to the <a href="https://www.weforum.org/agenda/2021/06/creative-manufacturing-handmade-sector-growth/" target="_blank" rel="noreferrer noopener">World Economic Forum</a>.



And yet, the founder says the sector has been neglected and under-served for far too long.&nbsp;



&#8220;Most heritage practitioners earn low salaries, which provides scarce financial incentive for current and future generations to continue the traditions of their ancestors,&#8221; Linda explains.



<h2 class="wp-block-heading">Blockchain use case</h2>



Turning to blockchain, Adami says the technology is critical to crystallizing culture, creating an immutable and invaluable record that also guarantees the authenticity and provenance of creative assets.



It can help to track the asset from its origin to distribution to the consumer and protects them by virtue of decentralized ownership and immutability, Adami says.



Asked why Quantum Temple was one of the ministry’s top picks, Himam told Blockworks it envisions the startup involving many creative economy actors in Bali to forge a unique cultural heritage native to the region.



“We have also seen that the curators of NFT creation also involve people who have experience in Balinese culture,” he said.



Quantum Temple aims to safeguard the cultural heritage of communities worldwide using Web3 tech, namely by leveraging NFT incentives including royalties.



Through the startup&#8217;s business model, anthropologists verify and curate the NFTs, documenting traditions, which Quantum Temple hopes will raise awareness and appeal to conscious travelers and collectors wishing to support affected communities.



<a href="https://en.unesco.org/fieldoffice/santiago/cultura/patrimonio" target="_blank" rel="noreferrer noopener">UNESCO believes</a> cultural heritage is not just limited to physical monuments and object collections, but also includes living expressions passed down from ancestors. These expressions can include oral traditions, performing arts, social manners, rituals, festive events, knowledge and practices related to nature and the universe, and traditional crafts.



“By tokenizing cultural heritage, Quantum Temple creates three critical areas of value: immutable archives of culture, transparent alternative income streams through royalties and verified provenance, and recognition for cultural creators,” Adami said.



<h2 class="wp-block-heading">The art of the immutable dance</h2>



Quantum Temple’s &#8220;Paths to Alangö Cultural Heritage NFT Collection,&#8221; as it&#8217;s come to be known, also aims to explore how NFTs can be used to support cultural heritage.



As part of that effort, Quantum Temple has <a href="https://blockworks.co/news/nfts-for-social-good">developed a collection of NFTs</a> showcasing the &#8220;Cendrawasih&#8221; dance, in an ongoing project centered around Bali. The dance, meaning &#8220;Bird of Paradise&#8221; dance, originates from Legong, a sophisticated classical dance in Bali.&nbsp;



Videos of the dance have been preserved on the Ethereum and Algorand blockchains.



The project features 11 unique NFTs that represent different aspects of cultural heritage in Indonesia. The goal of the project is to understand how NFTs can be used to positively impact communities, particularly those who have never been involved with web3 or blockchain initiatives before.



&nbsp;By doing so, the project hopes to unlock the social impact of Web3 in cultural regions.



The project is part of a larger focus for 2023, which includes piloting initiatives across artifact and experience NFTs and contributing to the Quantum Temple&#8217;s Impact Fund for blockchain education and inclusion. The ultimate goal is to prove the use case of NFTs and unlock social impact in cultural regions through Web3.



The founder is hopeful the project will expand to further countries abroad.



Quantum Temple first originated through fieldwork in Indonesia but has already expanded and completed projects in Panama and Peru which will be revealed later this year, Adami said.



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Web3 Startup Helps Indonesia’s Tourism Economy Survive

<div id="highlights-block_632ab227d8022" class="highlights">
 <ul>
 <li>Indonesia’s trade ministry wants two-thirds of crypto exchange board members and directors to be citizens residing within the country</li>
 <li>Client funds will also need to be custodied by a third party while exchanges will be barred from reinvesting those stored assets</li>
 </ul>
 
</div>



Indonesia will seek to clamp down on foreign ownership of crypto exchanges by introducing a new rule which mandates 66% of company board members and directors be citizens living within the country.



The ministry&#8217;s Commodity Futures Trading Regulatory Agency (Bappetbi) is expected to roll out the new ruling soon, <a href="https://www.reuters.com/markets/currencies/indonesia-tighten-rules-crypto-exchanges-ensure-more-local-control-2022-09-20/" target="_blank" rel="noreferrer noopener">Reuters reported</a> Tuesday citing deputy trade minister Jerry Sambuaga.



Sambuaga told reporters after a parliamentary hearing that the ministry did not wish to carelessly dole out permits to exchanges. Instead, it would issue them to platforms that the ministry considers credible after meeting the necessary requirements.



Blockworks reached out to the ministry to better understand the timeframe for the ruling, as well as the requirements for exchanges, but a spokesperson wasn&#8217;t immediately available.



The agency will also mandate exchanges use a third party for the custody of client funds while prohibiting the marketplaces from reinvesting the stored assets, per the report, the latter resembling the primary activity of now-bankrupt crypto lenders Celsius and Voyager.



All this marks another step in Indonesia’s journey to regulating digital assets. Last year, the country cracked down on <a href="https://www.bepartners.co.id/news/cryptocurrencies-%E2%80%93-indonesia%E2%80%99s-current-legal-climate-on-crypto-assets#:~:text=According%20to%20Regulation%20No.,order%20to%20be%20traded%20legally." target="_blank" rel="noreferrer noopener">unlicensed crypto merchants</a> and payment processors deemed to be operating outside the agency’s purview.



The archipelago nation, which consists of 17,000 separate islands, is one of the largest adopters of cryptocurrencies in the world, with transaction activity having exceeded twice the <a href="https://business.yougov.com/content/41899-indonesia-leads-globe-adoption-cryptocurrencies-fu" target="_blank" rel="noreferrer noopener">global average</a> in April, according to YouGov.



Indonesia recognized crypto as a commodity and formalized trading of the asset class in 2018, including via centralized exchanges. Though under recent regulatory frameworks in 2019 and 2020, only <a href="https://www.cekindo.com/blog/cryptocurrency-indonesia#:~:text=Indonesia%20Recognizes%20Cryptocurrency%20as%20a,or%20Bappebti%2C%20published%20Regulation%20No." target="_blank" rel="noreferrer noopener">229 cryptoassets</a> are legally sanctioned for trading by licensed entities in compliance with Bappetbi. 



It comes as the industry bore the brunt of several major project collapses including Do Kwon’s Terra ecosystem and Marcus Lim’s <a href="https://cms.blockworks.co/zipmex-taps-restructuring-firm-as-it-fights-to-stay-afloat/" target="_blank" rel="noreferrer noopener">Zipmex</a> exchange — which has a foothold in the country and is fighting to stay afloat through investment from outside parties. 



Kwon, whose ecosystem’s asset LUNA was legally sanctioned for trading in Indonesia via <a href="https://zipmex.com/id/en/luna/buy/" target="_blank" rel="noreferrer noopener">Zipmex</a>, has a warrant out for his arrest in <a href="https://cms.blockworks.co/south-korea-issues-arrest-warrant-for-terra-ceo-do-kwon-report/" target="_blank" rel="noreferrer noopener">South Korea</a>, with his current whereabouts unknown.



Didid Noordiatmoko, the agency’s acting head, told the parliamentary hearing on Tuesday its new ruling could prevent an exchange’s C-suite from bolting from the country when a problem crops up.



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Indonesia Wants Crypto Exchanges to Stop Reinvesting User Funds

Bessie Liu

<div id="highlights-block_62d03cdaf6cfd" class="highlights">
 <ul>
 <li>Indonesia remains a leader in cryptocurrency ownership</li>
 <li>More than half of crypto investors in Indonesia are women</li>
 </ul>
 
</div>



Global payments platform Mastercard has partnered with Middle Eastern global digital asset gateway, Fasset, to expand its financial services to Indonesia.



There are currently over <a href="https://www.temasek.com.sg/content/dam/temasek-corporate/news-and-views/resources/reports/future-of-southeast-asia-digital-financial-services.pdf" target="_blank" rel="noreferrer noopener">92 million</a> unbanked people in Indonesia, and the collaboration between Mastercard and Fasset aims to use the digital asset market in furtherance of financial inclusion goals.



“Asset ownership is the strongest way to power healthy livelihoods and economies. Digital asset-driven remittance corridors can unleash a new wave of socioeconomic prosperity through unique product offerings that we’re diligently building,” Hendra Suryakusuma, Country Director of Fasset Indonesia, said in a statement.



Learn more: <a href="https://cms.blockworks.co/can-crypto-address-the-biggest-obstacle-facing-the-unbanked/">Can Crypto Address the Biggest Obstacle Facing the Unbanked?</a>



Fasset, the platform that allows users to buy, sell, send and store digital assets and tokens, raised a $22 million Series A led by Liberty City Ventures and Fatima Gobi Ventures in April this year and has since had ambitions to expand its offerings to Indonesia and Pakistan.&nbsp;



Indonesia currently leads in cryptocurrency ownership worldwide in terms of percentage adoption. According to Gemini’s <a href="https://www.gemini.com/state-of-crypto" target="_blank" rel="noreferrer noopener">2022 Global State of Crypto report</a>, 41% of surveyed participants in Indonesia own digital assets. The island nation also leads in the adoption of cryptocurrency among women, who make up more than half of crypto investors in the country.



“With more people relying on digital assets and technologies to become resilient, there is a need for key players in the public and private sectors to come together to create solutions that can lead to new opportunities and solutions for wider financial inclusion,” Navin Jain, Country Manager of Mastercard Indonesia said.



Mastercard has been actively expanding its services in the crypto space. Alongside Web3 influencers, it recently announced the launch of The Belle Block, a community group focused on empowering women and non-binary individuals to use Web3 technology and cryptocurrency and also partnered with various NFT marketplaces to allow cardholders to <a href="https://cms.blockworks.co/you-can-now-buy-nfts-without-crypto/" target="_blank" rel="noreferrer noopener">directly purchase NFTs</a> with fiat currencies.



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Mastercard Partners With Fasset to Drive Financial Inclusion in Indonesia

<div id="highlights-block_624a4ef775a96" class="highlights">
 <ul>
 <li>The move is in line with the nation&#8217;s tax reforms last year following its economic recovery from the Covid-19 pandemic</li>
 <li>Cryptocurrency trading in Indonesia will be subject to a 0.1% VAT and income tax on transactions, beginning next month</li>
 </ul>
 
</div>



Indonesia will begin taxing crypto transactions by way of a value-added tax (VAT) and an income tax next month in a move that could net the government additional revenue from domestic trading activity.



According to a report by <a href="https://www.reuters.com/business/finance/indonesia-impose-vat-income-tax-crypto-assets-may-2022-04-01/" target="_blank" rel="noreferrer noopener">Reuters</a> on Friday, the archipelago, which is made up of more than 17,000 islands, will begin charging 0.1% on both VAT and income tax by May 1.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">&#8220;Crypto-assets will be subject to VAT because they are a commodity as defined by the trade ministry,&#8221; tax official Hestu Yoga Saksama told a media conference last week. &#8220;They are not a currency&#8230;so we will impose income tax and VAT.&#8221;</blockquote>



VAT is a form of taxation applied to goods and services at every step along the supply chain or sale to end consumers. Indonesia&#8217;s rate of 0.1% is significantly lower than the 11% it charges for other products. By comparison, Australia levies a rate of 10% while the US has a sales tax set at the state level ranging from 0% to 11.5%.



The move follows the country&#8217;s wide-ranging <a href="https://www.ibfd.org/sites/default/files/2021-10/Indonesia%20-%20Indonesia%20to%20Increase%20Individual%20Income%20Tax%20and%20VAT%20Rates%20under%20Tax%20Codes%20Harmonization%20Bill%20-%20IBFD.pdf" target="_blank" rel="noreferrer noopener">tax reforms</a> last year — amid the nation&#8217;s economic recovery from the Covid-19 pandemic — which included provisions to tax profits on crypto trading activity.



Indonesia&#8217;s government is still working on the implementation of those regulations, Saksama said, as cited in the report.



Like other Asian nations within the region, including Thailand and Vietnam, Indonesia has outlawed crypto for use in payments, though its citizens are allowed to trade them as a commodity.



Indonesia is Southeast Asia&#8217;s largest economy, according to data by <a href="https://www.worldbank.org/en/country/indonesia/overview#1" target="_blank" rel="noreferrer noopener">The World Bank</a>. The nation is also the world&#8217;s fourth-largest largest, with a population exceeding 273 million people across 300 ethnic groups.



It is estimated that more than <a href="https://triple-a.io/crypto-ownership-indonesia/" target="_blank" rel="noreferrer noopener">2.6%, or 7.2 million Indonesians</a>, currently own some form of crypto, data by payments provider&nbsp;Triple A shows.



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Indonesia To Introduce 0.1% Crypto VAT, Income Tax Next Month

Sam Reynolds

<div id="highlights-block_61b32a811ee75" class="highlights">
 <ul>
 <li>Bloomberg is reporting that Binance is in talks with PT Bank and its controlling family to set up a joint venture in country</li>
 <li>Indonesians have shown exceptional enthusiasm for digital assets, as the national stock exchange with its plethora of state-owned enterprises and other lethargic forms no longer excite investors</li>
 </ul>
 
</div>



Sensing a market opportunity in Indonesia, <a href="https://www.thejakartapost.com/news/2021/08/05/indonesia-now-has-more-crypto-investors-than-stock-market-investors.html" target="_blank" rel="noreferrer noopener">where crypto traders outnumber equity investors</a>, Binance is said to be in discussions with Indonesia’s richest family to create a local version of its exchange in-country in conjunction with the family’s bank and telecom.&nbsp;



According to <a href="https://www.bloomberg.com/news/articles/2021-12-10/binance-weighs-crypto-venture-with-indonesia-s-richest-family?utm_medium=social&amp;utm_source=twitter&amp;utm_content=crypto&amp;utm_campaign=socialflow-organic" target="_blank" rel="noreferrer noopener">Bloomberg</a>, the exchange is in discussions with the Hartono family, which controls PT Bank Central Asia and PT Telkom Indonesia. Bloomberg says the talks with Binance would likely involve both companies as Indonesia is increasingly a <a href="https://www.statista.com/statistics/802628/digital-device-usage-among-adults-by-device-indonesia/" target="_blank" rel="noreferrer noopener">mobile-first economy</a>, with many of the new middle class eschewing a PC in favor of a smartphone.&nbsp;



Binance is said to already have an investment in Tokocrypto, one of the country’s largest exchanges that’s considering an IPO in 2022.&nbsp;



Although Indonesia’s national religious council has declared cryptocurrency to be haram, or forbidden to be used by Muslims, as it is incompatible with Islamic Finance, this ruling isn’t binding as the country is nominally secular in its governance, even as it is the world’s largest Muslim-majority state.&nbsp;



Overall, the government has been supportive of the asset class. The Indonesian Trade Ministry Futures Exchange Supervisory Board gave crypto the green light as an asset class <a href="https://beincrypto.com/indonesian-regulator-accepts-bitcoin-as-tradeable-commodity/" target="_blank" rel="noreferrer noopener">in 2019</a>, while prohibiting its use as a payment mechanism.&nbsp;



The country is home to three stablecoins denominated in Indonesian rupiah: XIDR, from StraitsX, which also has a Singapore dollar denominated stablecoin, and Binance IDR, used primarily on the Binance-backed Tokocrypto exchange as well as the RupiahToken.



This report from Bloomberg follows a broader trend of banks in Asia setting themselves up for exposure to digital assets. Rules enacted earlier this year in Korea require exchanges to partner with local banks to ensure KYC and tax compliance, <a href="https://cms.blockworks.co/morgan-stanleys-rumored-bithumb-play-shows-institutional-interest-in-koreas-digital-asset-infrastructure/" target="_blank" rel="noreferrer noopener">starting an investment frenzy in-country</a>. In Singapore, <a href="https://cms.blockworks.co/singapores-dbs-reports-100-million-in-digital-assets-in-custody/" target="_blank" rel="noreferrer noopener">DBS opened up</a> an institutional trading desk for crypto while in Thailand <a href="https://cms.blockworks.co/thailands-scb-is-buying-51-of-bitkub/" target="_blank" rel="noreferrer noopener">local bank SCB bought a majority stake</a> in Thai exchange Bitkup.&nbsp;



Binance did not comment publicly on the report.



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Binance Considering Institutional Partnership With Indonesia’s PT Bank

<div id="highlights-block_619b86d6b037b" class="highlights">
 <ul>
 <li>Crypto adoption is surging in Indonesia, as the country’s growing middle class looks for investment alternatives to real estate and equities</li>
 <li>Aymeric Salley, the co-founder of StraitsX, told Blockworks in a prior interview that one day the majority of stablecoins will be denominated in currencies that aren’t the USD</li>
 </ul>
 
</div>



StraitsX, the company behind XSGD, the Singapore-dollar denominated stablecoin which is quickly becoming one of the larger non-USD denominated stablecoins, announced today the launch of an Indonesian rupiah-denominated stablecoin, the XIDR. 



Indonesia has quickly become a regional hotspot for crypto trading, with the <a href="https://www.thejakartapost.com/news/2021/08/05/indonesia-now-has-more-crypto-investors-than-stock-market-investors.html">Jakarta Post</a> reporting that the country has more crypto investors than stock investors now, owing to the fact that most major equities on the board are state-owned and have provided only stale returns.&nbsp;



“XIDR presents a way for the unbanked population to gain access to financial services. It also represents our next step to enabling, democratizing and accelerating access to digital assets for individuals and businesses in Asia and beyond,” Aymeric Salley, co-founder of StraitsX said in a statement.&nbsp;



In a <a href="https://cms.blockworks.co/a-majority-of-stablecoins-will-be-non-usd-says-straitsx-founder/" target="_blank" rel="noreferrer noopener">previous interview with Blockworks</a>, Salley has said that he believes that eventually the majority of stablecoins will be denominated in currencies aside from the USD as crypto takes off in emerging markets and locals prefer to denominate their transactions in their own currency.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“StraitsX does not believe that this current state is representative of the market demand but rather the consequence of a lack of trusted and compliant alternatives denominated in other native fiat currencies,” he said.</blockquote>



Part of this market demand has come from what local traders have called the ‘Rendang Premium’, named after a local soup, a premium added to crypto transactions in the country when converting USD to rupiah, given the relative lack of liquidity of the currency. 



The XIDR isn’t the first rupiah-denominated stablecoin. There’s also the Binance IDR, used primarily on the Binance-backed Tokocrypto exchange and the <a href="https://rupiahtoken.com/">RupiahToken</a>. 



There are also <a href="https://cms.blockworks.co/j-p-morgan-testing-blockchain-to-solve-money-transfer-woes/" target="_blank" rel="noreferrer noopener">a number of projects</a> in the country backed by Indonesian banks using blockchain technology to develop more efficient remittance platforms for its migrant worker population. In May, PT Bank Negara Indonesia announced a partnership with J.P Morgan to use J.P Morgan’s Confirm tool on its blockchain-powered <a href="https://www.jpmorgan.com/onyx/liink">Liink network</a> to expedite wire transfers from Taiwan where <a href="https://en.wikipedia.org/wiki/Demographics_of_Taiwan" target="_blank" rel="noreferrer noopener">250,000 Indonesian migrant workers reside</a>.  



<h3 class="wp-block-heading">Indonesia’s religious council calls crypto ‘Haram’</h3>



A potential obstacle to widespread adoption of crypto in-country is Indonesia’s national religious council. The National Ulema Council of Indonesia, or MUI, has declared that cryptocurrency’s speculative nature means that it is ‘Haram’, or forbidden for Muslims.&nbsp;



Ahmad Fahrur Rozi, a spokesperson for the East Java branch of Nahdlatul Ulama, one of Indonesia’s largest Islamic organizations, told Australia’s ABC that crypto trading tends to involve &#8220;fraudulent practices and gambling&#8221;, hence why it is illicit for Muslims.&nbsp;



&#8220;Just like it&#8217;s not allowed for a person to buy indistinct objects, like &#8216;fishes in the sea&#8217; or &#8216;birds in the air&#8217;,&#8221; <a href="https://www.abc.net.au/news/2021-11-21/cryptocurrency-is-considered-haram-in-indonesia/100630646" target="_blank" rel="noreferrer noopener">he told the broadcaster</a>, saying that people speculate on crypto’s value without knowing the material reason for its change in value.



This, however, is subject to debate. A blog post on UK-based Islamic equity crowdfunding platform <a href="https://www.qardus.com/news/what-is-cryptocurrency-and-is-it-halal" target="_blank" rel="noreferrer noopener">Qardus</a> quoted Sharia advisor Mufti Muhammad Abu-Bakar who views cryptocurrency as acceptable for Muslims as all commodities and currencies are subject to some form of speculation.



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StraitsX Launches Indonesian Rupiah Stablecoin

<div id="highlights-block_618d2e2c71697" class="highlights">
 <ul>
 <li>The National Ulema Council of Indonesia, the world’s largest Muslim-majority country, has declared that cryptocurrency is incompatible with Islamic Finance </li>
 <li>The ruling doesn’t make crypto illegal in Indonesia, where there’s an enthusiastic retail market and institutional investment to improve efficiency or remittances, but it might deter some Muslims</li>
 </ul>
 
</div>



Indonesia’s national religious council has declared cryptocurrency to be haram, or forbidden to be used by Muslims, as it is incompatible with Islamic Finance, according to a statement released Thursday. First reported by <a href="https://www.bloomberg.com/news/articles/2021-11-11/crypto-is-forbidden-for-muslims-says-indonesia-s-ulema-council?srnd=economics-vp" target="_blank" rel="noreferrer noopener">Bloomberg</a>, the <a href="https://mui.or.id/" target="_blank" rel="noreferrer noopener">National Ulema Council of Indonesia</a>, or MUI, has declared that cryptocurrency&#8217;s speculative nature is to blame. 



Asrorun Ni&#8217;am Sholeh, head of religious decrees, said that cryptocurrency has “elements of uncertainty, wagering and harm” and therefore is forbidden to be used by Muslims. 



Islamic Finance has strict prohibitions against certain types of financial instruments that are otherwise normal in other markets. The two <a href="https://www.investopedia.com/articles/07/islamic_investing.asp" target="_blank" rel="noreferrer noopener">pillars of prohibition</a> are based upon the avoidance of riba (usury) and gharar (deception). For example, interest is heavily regulated; institutions that loan also need to be prepared to bear some of the losses of the borrower should their enterprise go south. Certain types of insurance are also prohibited, as are derivative products. 



It should be noted that the decisions coming from the MUI are not legally binding — officially Indonesia is a state where religious pluralism is enshrined in law — but they may deter Muslims in the country from investing in crypto. There’s also <a href="https://www.qardus.com/news/what-is-cryptocurrency-and-is-it-halal" target="_blank" rel="noreferrer noopener">some considerable debate</a> on the topic.



“A comprehensive Islamic interpretation, one that sparked a massive rise in Muslim investment in Bitcoin and Ethereum in 2018, was provided by Sharia advisor Mufti Muhammad Abu-Bakar (former advisor to Blossom Finance) who argued that Bitcoin is permissible under Shariah law,” wrote UK-based Islamic equity crowdfunding platform Qardus earlier this year. “He considered arguments that crypto itself was speculative, but his view was that all currencies have a speculative element and this did not automatically deem crypto as haram.”&nbsp;



Officially, the Indonesian government is quite supportive of the development of digital assets and blockchain technology.&nbsp;



<a href="https://rupiahtoken.com/blog" target="_blank" rel="noreferrer noopener">The Rupiah Token</a>, a stablecoin backed by the country’s local currency, the Indonesian Rupiah, has been given a regulatory green light. As Blockworks <a href="https://cms.blockworks.co/j-p-morgan-testing-blockchain-to-solve-money-transfer-woes/" target="_blank" rel="noreferrer noopener">previously</a><a href="https://cms.blockworks.co/j-p-morgan-testing-blockchain-to-solve-money-transfer-woes/"> reported</a>, major Indonesian banks are working on reducing friction and costs for the billions of remittances the country’s migrant workers send back every month. BRI Ventures, a subsidiary of Bank Rakyat Indonesia, is an active investor in Ripple’s xCurrent and is working with Singapore-based FinTech Nium to develop an API that can be deployed to the nation’s smaller, regional banks. 



PT Bank Negara Indonesia, a state-backed bank, has been working with J.P. Morgan on Confirm, a blockchain-based tool to expedite wire transfers, and has deployed it on a payment corridor between Taiwan — where 250,000 Indonesian migrant workers reside — and Indonesia.&nbsp;



MUI did not respond to Blockworks’ press queries about the compatibility of stablecoins and DeFi with Islamic Finance by the time of publication.



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