Technology is rapidly evolving, ushering us into the digital era, which has brought about numerous changes in several industries, particularly the financial industry. To match the public's need for money that can be transmitted anywhere swiftly and safely, money is also evolving into increasingly efficient forms and functions. Several new fintech companies have sprung up, offering digital financial goods in the form of electronic money (e-money), allowing consumers to conduct financial transactions without needing cash, or what is commonly known as cashless¹. Almost all transactions, both personal and commercial, that previously relied on traditional techniques, notably paper currency, altered dramatically with the advent of the electronic money platform.

Non-cash payments made by the public in the form of electronic money or e-money have increased from 2021 by 33.71%. This was recorded in September 2022, Bank Indonesia (BI) reported that the total value of electronic money transactions reached IDR 98.55 trillion². Community needs and developments in the financial sector are constantly increasing which has given birth to a Bitcoin-based virtual currency, then the term cryptocurrency has emerged, especially in various countries that have high remittance rates. Technological advances create disruptive phenomena in the financial and banking industry. The progress that is believed to change the future of the financial industry is blockchain which is the basis for the emergence of digital currency¹.

Digital currency has the potential to develop financial system inclusion and efficiency, but on the other hand they also have the potential to create new risk that can affect economic, monetary and financial system stability³. This phenomenon will result in shadow banking, shadow currency and even shadow central banking. Thus forcing the central banking community to calibrate its policy approach. In order to overcome risks to the stability of these crypto assets, an appropriate regulatory framework is needed to overcome them. Therefore, the existence of crypto assets is also the background for central banks to explore the design and issuance of Central Bank Digital Currency (CBDC) or digital currency issued by central banks as a prospective future proof solution⁴.

Exploration of CBDC issuance by Central Banks is carried out based on six objectives, namely 1) Providing risk-free digital payment instruments using central bank money 2) Mitigating non-sovereign digital currency risks 3) Expanding payment system efficiency and stages, including cross border 4) Expanding and accelerating financial inclusion 5) Providing new monetary policy instruments 6) Facilitating the distribution of fiscal subsidies³. Technological developments that have brought many changes to the financial system in the world as well as what is currently happening in Indonesia are one of the focuses of the discussion in this article. Apart from that, this article will bring us to know and understand the digital financial transformation that exists in Indonesia. Therefore, the discussion this time will begin by understanding and distinguishing the types of digital currency which sometimes make us confused by the various terms in it. Then, more specifically, we will describe CBDC (Central Bank Digital Currency) as a digital currency which indirectly brings a new chapter in currency history. And based on research, the discussion will end by understanding the concept of digital currency that is happening in Indonesia as very important information for us.

Digital Currency is an asset that is stored in electronic form which can basically function the same as physical currency in general, namely facilitating payment transactions⁵. Digital currency is an innovation that can have an impact on various aspects of financial markets and the wider economy. Currently, however, digital currency schemes are not yet widely accepted, and face a series of challenges that could limit future growth. As a result, the impact on financial services and the wider economy is currently not maximized, and it is possible that in the long term digital currency remains a product for a limited user base. However, various features of distributed ledger technology have the potential to improve several aspects of the efficiency of payment services and financial market infrastructure (FMIs) in general. Digital currency has several characteristics including: it is only available in digital form which can be centralized or can also be decentralized. Fiat currency or if it is in a digital asset can be a CBDC (Central Bank Digital Currency) which is a centralized production and distribution system by a central bank, while cryptocurrency is an example of a decentralized digital currency system. And can transfer value like money in general⁶. Several types of digital assets or new payment instruments can be classified into three major groups namely⁷:

1. Cryptocurrency
   A digital currency designed to use cryptography to secure and verify transactions on the network. Cryptocurrencies emerge from a combination of cryptography and distributed ledger technologies, which together provide the foundation for decentralized peer-to-peer payments, the most common examples of which are Bitcoin and Ethereum. Now cryptocurrency is known and used as an asset by some people both in the world and in Indonesia itself. However, in fact, based on research conducted by The Federal Reserve 2022, it states that cryptocurrency has not been widely adopted as a means of payment in the United States due to several reasons, one of which is that the technological system used still allows consumers to be vulnerable to loss, theft, and fraud⁶.
2. CBDC (Central Bank Digital Currency)
   Central Bank Digital Currency or CBDC is the digital version of the official currency issued by the government. CBDCs are issued and regulated by the monetary authority or central bank of a country. CBDC is similar to cryptocurrency and operates using a digital ledger (could be blockchain, or not), to speed up and increase the security of digital transaction processes.
3. Stablecoin
   Stablecoin is a Type of cryptocurrency created to offer stable prices and backed by reserve assets. Stablecoins are a variety of cryptocurrencies developed to combat the volatility of crypto prices. The PWC report notes that well-designed and properly regulated stablecoins have the potential to support faster, more efficient, and more inclusive payment options. However, the PWC report also notes that the potential increase in the use of stablecoins as a means of payment raises various concerns regarding potential destabilization of flows, disruptions in payment systems, and concentration of economic power. The PWC report highlights gaps in the powers of regulators to mitigate this risk⁶.

Based on these three types of digital currency, we can understand that all cryptocurrencies are digital currencies, but not all digital currencies are cryptocurrencies like the CBDC example. More simply we differentiate into two groups, namely: Cryptocurrency and Central Bank Digital Currency. The difference between the two is: in implementing CDBC using a private blockchain system where the user identity of CDBC is tied to his bank account. Can function as a means of payment as usual and the central bank can regulate the amount of supply and network. Whereas in cryptocurrency, it uses a public blockchain system which can use anonymous identities. Its use is for speculation and the payment system depends on regulations in each country and the authority that regulates it is the crypto network market itself⁸.

As previously explained, CBDC is a type of digital currency that can replace the fiat currency that we are currently using. The central bank's goal is to maximize the effectiveness of CBDCs in fulfilling the basic functions of each public currency, namely, its efficiency as a medium of exchange, its security as a store of value, and its stability. As a unit of account for economic and financial transactions. Based on these criteria, the characteristics of a well-designed CBDC can be identified as follows⁹: 

1. CBDC was created account-based so that it can function as a medium of exchange that is practically free of charge. It can be procured directly at the central bank itself or provided through a public-private partnership with a commercial bank.
2. Interest-bearing CBDC secure stores of value can provide a rate of return commensurate with a risk-free asset, such as short-term government securities. The CBDC interest rate will be the main tool for conducting monetary policy.
3. Gradual obsolescence of CBDC paper currency can be made widely available to the public with gradual transfer fees for transfers between cash and CBDC. As a result, adjustments to the CBDC interest rate will not be limited by the effective lower bound. Central Bank Issued Universally Accessible Electronic Cash CBDC Reserve Money Bank Account Money.
4. The monetary policy framework can promote true price stability, i.e. the real value of the CBDC will remain stable over time in terms of the broad consumer price index. Such a framework would facilitate the systematic and transparent implementation of monetary policy.

Issuing CBDCs as well as meeting policy objectives will require appropriate technology. Various pre-existing technologies have the potential to support core features. However, whatever is chosen will require extensive practical testing and experimentation. In these cases, central banks usually need to acquire technology from or partner with external vendors to develop proprietary solutions. So far, there have been two main approaches to the question of technology supply. Selecting prime contractors to supply the technology and working with central banks to develop CBDCs¹⁰. The following table is a choice of technology in several countries that are currently conducting CBDC trial stages.

The use of distributed ledger technology (DLT), currently the best known of which is blockchain, has in recent years emerged as a promising alternative to technologies based on centralized ledgers. Therefore, central banks are faced with other technological choices. The choice is very difficult because DLT is still developing, and its capacity and suitability are being explored. Therefore, several pilot projects are being tested using DLT although the results are not certain whether or not it will be implemented. Referring to the table above so far indicates that not all DLTs are projected to be the main engine of CBDC, and jurisdictions have differing views on the potential benefits of the technology. As in the e-CNY pilot example, the PBOC has committed to what it calls a "hybrid architecture". Thus, DLT is used in the e-CNY system but only in limited areas where it is considered to have advantages over other technologies¹⁰.

A survey conducted by the BIS in 2021 found that 81 global central banks were in the experimental and piloting stages. One of the countries implementing CBDC is the e-CNY (Digital Yuan) which is issued by the PBOC (Central Bank of China) and is operated by authorized operators and adopts a centralized management model and a two-level operational system. e-CNY is the main substitute for cash in circulation (M0) and will coexist with physical RMB and prioritize serving domestic retail payment requests. The characteristics of e-CNY include unlimited legal credit, dynamic account combinations, controllable anonymity and zero interest and exchange fees. The circulation of e-CNY itself is carried out using a two-stage process that transfers e-CNY from the PBOC to commercial banks. Then the bank will distribute the currency directly to consumers. The transaction process by the user can also be done online and offline⁸.

If in several countries exploring CBDCs, there are even a number of countries that are currently in the piloting stage, for example in China with e-CNY, then Indonesia is one of the countries currently entering the piloting stage. On November 30, 2022, Bank Indonesia officially issued a White Paper entitled "Garuda Project Navigating the Rupiah Digital Architecture". The Garuda project is an umbrella project for various exploration initiatives for rupiah digital architectural design options. This project is a strategic initiative of Bank Indonesia in carrying out a series of rupiah digital experiment projects, both from a wholesale and retail perspective. This report is expected to provide information guidance regarding the digital rupiah high-level design which contains the amount of substance for the digital rupiah development plan⁴. 

Like other countries, digital rupiah is a form of currency transformation in the digital era and to be able to balance the need for financial access for the Indonesian people. So through this project, Bank Indonesia measures the most accurate digital rupiah design with several functions that will be carried out, namely: (i) a legal digital payment instrument in the Republic of Indonesia, (ii) a core instrument for Bank Indonesia in carrying out its mandate in the digital era, and (iii) means to support financial inclusion and innovation and drive end-to-end efficiency⁴.

Digital rupiah will be issued in two types, namely digital rupiah wholesale (w-Digital Rupiah) and digital rupiah retail (r-Digital Rupiah) which will be developed with an end-to-end integrated approach from wholesale to retail4. In understanding the two types of digital rupiah, the basic thing we need to know first is the scope of the payment system which is grouped into two types of transactions, namely large value transactions (wholesale) and small value transactions (retail). Large value transactions have the characteristics of transactions that are important and urgent, including transactions between banks, transactions on financial markets or transactions with a ticket size value of ≥ IDR 1 billion. The infrastructure used to process this transaction activity is the Bank Indonesia Real Time Gross Settlement (BI-RTGS) and the Bank Indonesia Scripless Securities Settlement System (BI-SSSS). Meanwhile, retail transactions include transactions between individuals with a ticket size value of <Rp. 1 billion with the characteristics of small value and relatively high frequency. The infrastructure used to process this transaction activity is the Bank Indonesia National Clearing System (SKNBI).¹¹ 

Digital rupiah will be a complement to currency (paper and metal) and third party current accounts at Bank Indonesia. Seeing the different types of transactions and the needs of the community, the two types of digital rupiah will be differentiated based on the number of transactions. W-Digital Rupiah can only be used on a limited basis by parties appointed by Bank Indonesia, such as third party checking accounts at Bank Indonesia. Meanwhile, the R-Digital Rupiah can be used by the general public like banknotes and coins with a small number of transactions⁴. There are two methods that we can choose to access digital rupiah, namely through an account and/or token. W-Digital Rupiah is accessed by users through token-based verification. As a suitable choice for w-Digital Rupiah because it is seen as more capable of facilitating transactions between actors in financial markets which tend to be more complex, as well as being a complement to the account-based Bank Indonesia Real Time Gross Settlement (BI-RTGS).

R-Digital Rupiah is accessed by users through account and/or token-based verification, which is regulated based on tiering and transaction value (capping) segmentation. Token-based r-Digital Rupiah will be used to facilitate small value transactions up to a certain threshold. Meanwhile, transactions that exceed the threshold can only be facilitated by account-based r-Digital Rupiah. The use of tokens for r-Digital Rupiah access replicates the flexibility of paper and metal money. The granularity of data from profile recording and token-based r-Digital Rupiah transactions will be recorded from the information in the wallet address. However, to maintain payment integrity, that flexibility needs to be limited to a certain extent. In this context, account-based r-Digital Rupiah is the right choice for large value transactions because it is seen as superior in fulfilling APU PPT commitments.

As with other types of digital currency, the role of technology is very important in efforts to implement CBDCs in a country. It does require appropriate technology and must go through various processes such as testing and extensive practical experimentation. In digital rupiah, infrastructure and technology platforms use a combination of DLT and centralized infrastructure. The choice of DLT for w-Digital Rupiah opens opportunities for Bank Indonesia and market players to streamline financial transactions, including through the various features offered by smart contracts. DLT is also a more robust technology than a centralized system along with the reduced risk of a single point of failure. In maintaining security, permissioned-based DLT was chosen considering that access to the DLT platform is not open to all parties. In addition, the issue of scalability becomes better than permissionless DLT. All processes for selecting rupiah digital technology infrastructure pay close attention to aspects of 3i (integrated, interoperable and interconnected)¹². The connection between w-Digital Rupiah and r-Digital Rupiah, each of which has a different technology solution, still needs to occur to ensure end-to-end integration.

It can be concluded that of the various terms in the financial world that have emerged in this digital era (digital currency), in general they can be divided into three types (Cryptocurrency, Central Bank Digital Currency and Stablecoin). All three have their own advantages and disadvantages. However, in terms of cryptocurrency, there are still various weaknesses that make central banks explore the design and issuance of Central Bank Digital Currency (CBDC) or regulated digital currency as a prospective future proof solution. Some countries, such as China, have launched their CBDCs, while some are still in the experimentation and piloting stages, such as one in Indonesia. The presence of a white paper entitled "Garuda Project Navigating Rupiah Digital Architecture" serves as an umbrella for various exploratory initiatives for CBDC implementation efforts in Indonesia. Digital rupiah will become a legal digital payment instrument in the Republic of Indonesia, and support financial inclusion and innovation and promote efficiency from end to end.