Bank Indonesia has launched a consultation for the first phase of Project Garuda, its central bank digital currency (CBDC) initiative.
In late November, the central bank unveiled its plans for a digital rupiah that involves a three-stage approach, including a basic wholesale CBDC (wCBDC), a more advanced wCBDC, and finally a retail CBDC.
The current consultation is for the first iteration of a wholesale CBDC that will have the basic functionality of CBDC issuance, redemption and transfer, including integration with the real time gross settlement (RTGS) system – the primary payment system. The digital rupiah will use a permissioned blockchain network.
What is novel about the wholesale CBDC (wCBDC) is it will not be limited to banks. Additionally, there are wholesaler and non-wholesaler designations. Wholesalers will be responsible for distributing a future retail digital rupiah, and the central bank will specify qualification requirements for wholesalers.
It’s unclear at this stage which non-bank institutions will be participants in the wholesale CBDC. The central counterparties for securities transactions will certainly participate, but likely non-bank payment providers may also be involved.
The central bank as regulator will have visibility over all wholesale transactions, but all other participants will only be able to see details on a need-to-know basis. However, some of the participants will run validator nodes on the blockchain, giving them some level of visibility into transactions where they are not a counterparty.
The second phase of the CBDC project will take the wholesale CBDC a step further and include the tokenization of securities and settlement of securities transactions, as well as other wholesale use cases.
Eventually, the plan is for the wholesale CBDC to provide the basis for a retail CBDC. So the central bank will issue wholesale CBDC to wholesalers who will distribute retail CBDC to retail users. In addition to this intermediated version, Bank Indonesia is also considering additionally directly serving end users, potentially in more remote areas.
The retail version of the digital rupiah is unlikely to be blockchain-based for scalability reasons.
