Central bank digital currencies (CBDC), digital versions of national currencies introduced in response to growing cryptocurrency adoption, would be an essential tool for combating crypto, according to the Central Bank of Indonesia.

The Central Bank of Indonesia is considering launching a digital rupiah to “fight” against cryptocurrencies like Bitcoin (BTC), Bank of Indonesia assistant governor Juda Agung said at a recent parliamentary meeting.

“A CBDC would be one of the tools to fight crypto. We assume that people would find CBDC more credible than crypto. CBDC would be part of an effort to address the use of crypto in financial transactions,” Agung stated, according to a Tuesday Bloomberg report.

The official noted that cryptocurrencies like Bitcoin are currently traded alongside commodity futures and regulated by the trade ministry despite severe impacts on the financial system.

The news comes shortly after the National Ulema Council (MUI), Indonesia’s top Islamic scholarly body, reportedly found cryptocurrencies like Bitcoin to be haram, or forbidden, by the tenets of Islam. The East Java branch of one of MUI previously issued a statement deeming the use of the cryptocurrency haram in late October.

As previously reported, the Indonesian government has taken a mixed stance on crypto regulation. Despite banning cryptocurrency payments back in 2017, local authorities have opted to keep cryptocurrency trading legal. In April 2021, Indonesia’s Commodity Futures Trading Regulatory Agency of the Ministry of Trading reportedly announced plans to launch a government-backed crypto exchange in the second half of 2021.

While maintaining a mixed stance on crypto, Indonesian regulators have been increasingly looking at a potential CBDC. In May, the Bank of Indonesia Governor Perry Warjiyo announced plans to launch a digital rupiah as a legal payment instrument in Indonesia.

Related: Retail-focused Singaporean CBDC to hedge against privately issued stablecoins

CBDCs such as the Chinese digital yuan are apparently designed to curb cryptocurrency adoption as one of their key features. Indonesia is not alone in thinking that CBDCs can help governments combat crypto. In mid-November, Bank of Russia governor Elvira Nabiullina said that CBDCs should serve as a good option for governments to replace decentralized cryptocurrencies like Bitcoin.

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