Sam Reynolds

<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">“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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