Bank Indonesia's Bitcoin Moment, Minus the Bitcoin Part

Bank Indonesia (Indonesia’s central bank) is planning to introduce a central bank digital currency, or CBDC — a digital version of the Rupiah that, in plain terms, looks a lot like Bitcoin, minus the part where no one is in charge. The central bank is in charge. ^[1]

That distinction matters. A CBDC is a state-issued digital token, designed to share the underlying technology with Bitcoin. The big difference is decentralization: a CBDC is centralized, and Bitcoin is not. The two share the technology. They do not share the philosophy. ^[2]

It turns out this idea isn’t as simple as adding the word blockchain to the word Rupiah. There is, however, a marketing department somewhere that is going to try, and a press release that is going to be optimistic about it.

So why do it? The official case is the usual holy trinity: efficiency, financial inclusion, and transparency. ^[3]

The unofficial case, which the government does not quite put in the press release, is that a digital currency lets the state hand out money with surgical precision. Including, conveniently, in time for the next election. ^[4]

For one thing, the government could have direct access to your finances. Which means, in practice, that it can see what you are buying. Fluffy handcuffs, a fun mask to wear on Halloween, the usual. The state has historically not been shy about who it watches, and a CBDC is, at heart, an instrument of attention. ^[5]

Then there is the small matter of cybersecurity. A centralized system is a single, well-marked target for anyone with a keyboard and a grievance. The Bank Indonesia version of “we have nothing to worry about” sits awkwardly next to the country’s reputation for cybersecurity, which is, to put it gently, a reputation. ^[6]

There is also the question of what a CBDC does to the banks. If the central bank can pay citizens directly, commercial banks stop being the middleman for a meaningful slice of the money supply. That is a structural change, not a software update. ^[7]

And then the Rupiah itself. A digital twin does not, on its own, weaken a currency. But a CBDC that the public does not trust — because the freeze button is too visible, or the privacy guarantees are too thin — can do strange things to the demand for physical cash. ^[8]

“Apparently, studies have shown that adopting CBDCs have the following benefits,” the announcement says, and then the announcement does not, in fact, list the studies. ^[9]

In fairness, the topic is complex enough that even a serious explainer would lose the room. The trade-offs sit in the same place they always sit when the state gets a new way to look at your money: how much visibility, how much programmability, and how clearly the off-switch is labeled.

I did the mathematics. Whether Indonesia should be proud of, or embarrassed by, this announcement is a question for the comments section, and the comments section, by tradition, is never wrong.

So, should you like it, or should you start writing comments about how blockchain is ruining everything? I have not got the faintest idea. Make of that what you will.