India And Indonesia To Expand Central Bank Cooperation On Payment Systems, Regulations

July 19, 2022
Bank Indonesia and the Reserve Bank of India have signed a memorandum of understanding that will lead to greater information sharing and other ties between the two central banks.

Bank Indonesia and the Reserve Bank of India (RBI) have signed a memorandum of understanding (MoU) that will lead to greater information sharing and other ties between the two central banks.

Under the MoU, the two central banks will cooperate on payment system upgrades, digital financial innovation and regulatory issues, including anti-money laundering (AML) and counter-terrorism financing (CTF) rules.

In a press statement, Bank Indonesia and the RBI said the goals of the MoU will be pursued through policy dialogue, technical cooperation, information exchange and joint initiation.

They added that the MoU provides a strong foundation for the co-development of efficient payment systems in the two countries, and for the expansion of cross-border payments connectivity between them.

These initiatives will be carried out through a combination of regular discussions on financial issues and developments, technical cooperation through joint training and seminars and cooperation to explore cross-border retail payment system innovations.

Perry Warjiyo, governor of Bank Indonesia, said the MoU is an important milestone in the relationship between the two central banks.

“It has been a long time since the two central banks worked together and this MoU will underscore even more solid collaborations in the future,” he said.

“Going forward, I am confident that this excellent relationship will result in beneficial outcomes for the two central banks and the people of both countries.”

Shaktikanta Das, governor of the RBI, said the cooperation underscores the common goals and challenges facing the two central banks.

“This MoU is a step forward in implementing joint efforts into a formal form,” he said.

"Going forward, the MoU will further strengthen bilateral relations between the two central banks and facilitate efforts to achieve an accessible, inclusive and secure financial system."

Indonesia leads G20 to CBDC

The announcement of the MoU comes after Indonesia hosted the G20 Finance Ministers and Central Bank Governors (FMCBG) meeting in Bali.

As part of its G20 presidency this year, Indonesia has proposed a G20 Financial Path to respond to five strategic challenges faced by central banks, treasuries and finance ministries globally.

Two of the strategic challenges relate to payments and regulatory frameworks, specifically “strengthening monetary and macroprudential policies supported by coordination through structural reforms” and drafting “central bank digital currency (CBDC) for interoperability and cross-border payments”.

As explained in a press statement, Indonesia’s G20 presidency will aim to promote new approaches to macroeconomic and financial system stability, which can in turn strengthen economic recovery.

Among central banks and other financial policymakers, the development, testing and potential issuance of CBDC is integral to this debate.

In particular, and as highlighted by the MoU, Indonesia’s G20 presidency aims to move towards a mutually beneficial CBDC design that can “facilitate cross-border payment connectivity while maintaining monetary and financial system stability”.

At the same time, Indonesia's G20 presidency is also taking aim at crypto-assets, an industry that the G20 believes requires tougher and more coordinated regulations, mitigating the “negative impact of crypto-assets on financial system stability through an effective regulatory and supervisory framework”.

For example, the FMCBG meeting echoed recent calls by the US Treasury and European regulators for a stronger regulatory and supervisory framework for crypto-assets.

The forum emphasised that such regulations must include tougher restrictions on stablecoins by applying the principle of “like activity, like risk, like regulation”.

“The goal to be achieved is to mitigate the risks of using crypto-assets and ensure a level playing field, without hindering innovation and inclusion,” said the office of Indonesia’s G20 presidency. “Building public awareness of the risks of using crypto-assets is important.”

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