Bank of Indonesia cracks down on Bali bitcoin business
Following bitcoin ban by Indonesia, authorities are looking to stem use in popular tourist spots.
Businesses in Bali are facing scrutiny over the apparent use of bitcoin in business transactions. Reports have surfaced in local publications that the Indonesian central bank is working in tandem with the special crimes unit of the national police forces to combat the reported surge in bitcoin payments.
Following national legislation in 2017 about digital payments, all payment methods other than the national currency, the Rupiah, are considered not legal tender. Since that time the Indonesian central bank, known as Bank Indonesia, has clarified its position stating outright that the ban on cryptocurrencies will be enforced.
This comes as the Balinese representative of Bank Indonesia (BI) has weighed in on recent reports of a surge in business transactions on the Island of Bali. Bali, a popular tourist destination for holiday-goers worldwide, attracts many tech-savvy expats to travel hot-spots such as Kuta, Seminyak and Ubud.
These three locations have been noted by the Indonesian authorities as havens for bitcoin transactions. The head of the BI representative office in Bali, Causa Iman Karana, has made the position of the authorities clear, stating that "since clarification has been given all those businesses should stop using bitcoin". This has sparked a wider crackdown by authorities.
Reuters reported that BI and the Indonesian authorities were made aware of the trend via social media and in late December mounted an undercover operation to identify businesses illegally transacting in Bitcoin. It is unclear at this stage if an undercover operation was conducted.
However, Karana did confirm that Indonesian authorities know of 44 businesses and merchants sending bitcoin payments. That number is in addition to two cafes known to be accepting bitcoin. Karana also confirmed that these businesses were identified via social media according to local news reports from Kompass.
While the full details of the transactions are unknown, Indonesian authorities said the cafes were accepting bitcoin for transactions over 0.001 units of bitcoin, which equals Rp 243,000 (US$19.44), as at the time of writing 22 January 2018. Karana added that an administration fee of Rp 123,000 (US$9.84) was also included in the services of the two cafes known to be accepting bitcoin.
A warning to all
It is unclear whether this fee was a transaction cost associated with bitcoin, or whether this is a usual cost built into Indonesian trade. There is a generally added government tax and service fee of a similar amount. It is unknown if the authorities were in a position to reveal more information about transactions than this. However, it is widely believed that at this stage, Indonesian authorities are emphasising that the use of bitcoin is illegal and consequences may follow.
Regardless, it is not yet clear whether BI intends to prosecute those businesses already identified. It may be that the authorities are sending a message to traders considering the use of bitcoin within Bali and Indonesia in general.
With an estimated population of 261 million people, Indonesia has the largest economy in Southeast Asia. Despite this large population there are only around 15 million tax registered entities within the archipelago. The Indonesian government could consider the use of bitcoin as a threat to its revenue stream because bitcoin can enable tax evasion.
It is no surprise then that Indonesia has completely outlawed virtual currencies such as bitcoin. In doing so, Karana has used strong language to warn traders that “nothing other than Rupiah can be used in transaction within Indonesia”. Only time will tell whether there will be any tolerance towards virtual currencies. However, strong language like seems a clear warning sign.