Indonesia bans fintech firms in payments from using cryptocurrencies

JAKARTA (Reuters) - Indonesia's central bank has issued a regulation banning use of cryptocurrencies by financial technology companies involved in payment systems, and said it is examining whether there's a need to regulate trading on virtual currency exchanges.

"Financial technology operators are banned from using virtual currency in payment system activities," said Sugeng, a deputy governor at Bank Indonesia (BI).

The regulation, signed in November but made public on Thursday, requires financial technology companies involved in processing payments, such as e-wallets, to register at BI to ensure virtual currencies are not used in payments.

Bank Indonesia (BI) first advised against using virtual currencies in 2014 and two years later banned payment system service providers from processing transactions using virtual currencies.

The central bank said on Thursday it had issued the new regulation to enhance governance over virtual currencies that could pose a big risk for the economy.

BI Governor Agus Martowardojo has previously said Bitcoin is not recognised as legal tender in Indonesia and warned that virtual currencies could be used in money laundering and terrorist financing.

So far, trading of virtual currencies has not been regulated in Indonesia, said Rosalia Suci, head of BI's legal department, but possible regulation of exchanges for them was something that the central bank "continues to look into".

Bitcoin.co.id, a local online cryptocurrency exchange, on its website said that at 0740 GMT Bitcoin was trading at 233.4 million rupiah ($17,225) per unit.

The virtual currency on Thursday briefly soared to a record high of $14,100 at the Luxembourg-based Bitstamp exchange, after jumping more than 35 percent this month

Some Indonesian merchants, including an online grocery store in Bali and online t-shirt stores in Jakarta, say on their websites that they accept payment in Bitcoin.

($1 = 13,545 rupiah)

(Reporting by Fransiska Nangoy; Editing by Ed Davies and Richard Borsuk)