Bank Indonesia plans to issue a regulation prohibiting transactions using Bitcoin, a digital currency created in 2009 by an unknown person or group under the alias Satoshi Nakamoto.
The regulation would take effect starting next year, an official has said.
Bank Indonesia head of transformation Onny Widjanarko said the regulation on e-money would be issued in the near future.
"Currently, there is no single regulation for those who carry out transactions using Bitcoin," Onny said in Jakarta on Tuesday as reported by kompas.com.
He said the central bank was currently carrying out an in-depth study to determine whether the central bank would include a ruling on Bitcoin in the prevailing e-money regulation or in a separate regulation on cryptocurrency.
Therefore, BI called on merchants not to accept Bitcoin as an official payment instrument as the bank would not be responsible for any losses incurred through transactions, Onny said.
He said that Bitcoin could potentially be used to violate prevailing regulations on terrorism, money laundering, prostitution and drug trafficking.
Countries hold different stances on Bitcoin, with China and Russia rejecting it while Japan accepts it as a payment instrument.
Bitcoin transactions are made with neither middle men nor banks. There are no transaction fees and transactions can be made anonymously.