The Analysis E-Commerce Payment Using Conventional Currency and Digital Money in Developed and Developing Countries in Millenial Era

With the development of the era, e-commerce is increasing and payment procedures are also changing. There is another alternative for payment, which is using virtual money called cryptocurrency such as bitcoin.  Bitcoin is an electronic money made in 2009 by Satoshi Nakamoto. The US Treasury calls the bitcoin of a decentralized currency that can be used in online payments.. Unlike common currency, bitcoin does not depend on trusting the major publishers and not through a third party or authority in its transactions.

 The Singapore government fixes taxes from bitcoin backed by regulation that bitcoin is a convincing investment, so bitcoin arrangements do not experience legal vacuum and has a clear regulation.

Bank Indonesia stated that Bitcoin is not legal, referring to law in the banking sector, Law no. 7 year 2011 about Currency, promulgated on 28th of June 2011 in Jakarta, the purpose of the establishment of this Act is to confirm the Rupiah as the Republic of Indonesia's legitimate currency along with all information about the physical and the use, and sanctions against fraud, misappropriation of Rupiah in business transactions and legitimate payment device in the Republic of Indonesia. Therefore, from the above explanation will be examined about the analysis of e-commerce payment instruments using conventional money (rupiah) and digital money (cryptocurrency) in developed and developing countries in the millennial era.

Previous research by Darmawan (2014) explained that transactions using bitcoin are hampered by the absence of government regulation and there is  no law protecting illegal bitcoin users so that any transaction using bitcoin will be punished according to the applicable law. In the present era, the researcher explains that transaction using bitcoin does not require bank account, credit card or intermediary. The file is an encryption of unique codes that make it unlike each other.

Cryptocurrency & Bitcoin Theory 

Traditional economics defines money as a common instruments of exchange in the exchange of goods and services (Paganelli, 2012). The role of money itself has 3 functions, namely as a instruments of payment, unit uni, and storage value (Conway, 2014). As technology develops, new money emerges, virtual money or cryptocurrency the process of converting readable information into unbreakable code, used to track purchases and transfers. One type of developing cyptocurrency is bitcoin.

Cryptocurrency is the name given to a system that uses cryptography to securely transmit data and to digitally exchange digital tokens (Dourado & Brito, 2014). Based on the journal written by Joey Conway with the title of Guide Guide to cryptocurrencies, in ca.1982 (Conway, 2014), David chaum of University Of California first published the idea of making a cryptographic-based payment method with a product called DigiCash that can keep data confidential its owner (Chaum, 1982). Cryptocurrency answer to the obstacles facing the current payment system that relies heavily on third parties as a publisher of payment products trusted to manage digital transactions such as mastercard, visa, paypal, and others. One of the cryptocurrency-based currencies is bitcoin.

The basic concept of bitcoin by making decentralized authority transaction system without any third party can verify using digital signature concept in every transaction (Nakomoto, 2008).

Theory of E-commerce

E-Commerce is a term that is often used related to the internet, but no one has explained clearly the meaning of e-commerce. Jong Wong (2010: 33) said that the notion of electronic commerce is the purchase, sale and marketing of goods and services through electronic systems, such as radio, television, and computer network and internet.  

Cryptourrency as Legitimate Payment e- commerce instrument  

Bank Indonesia (Indonesia, 2012) has discussed the research on payment system in Indonesia with the discussion about the potential of payment system in Indonesia will be better if supported by information technology, because information technology has become the backbone of economic activity, the payment process can be done quickly electronically. Bitcoin has developed from 2009 in Indonesia created by an individual or group called Satoshi Nakomoto. The bitcoin exchange rate rises with demand, but on the contrary if demand is low the bitcoin exchange rate will decrease. The concept behind bitcoin is to cut costs that are used to pay third parties in conventional sale and purchase transactions. The difference between bitcoin and conventional currency can be seen in the following table. 

       Comparison of bitcoin with other money

BITCOIN

CONVENTIONAL CURRENCY

Use peer to peer technology and do not have a central authority as a supervisor

Issued by the central bank as a form of authority to manage national monetary policy

Bitcoin is designed to become a digital currency.

Issued in a physical/ real form 

The number of bitcoin produced reaches 21 millions

Can be issued without limitation

Need high level of skill because using cryptocurrency

Do not need high skill or technology

 

Source: Primary Data, analyzed in 2018

By comparing bitcoin with our payment siystem, the legitimation status of bitcoin as the payment instrument in Indonesia can be seen in the following table.

                    Bitcoin legality in payment system

Elements

explanation

BITCOIN

Study / Legal Set

Rules issued by Bank of Indonesia

No rules/ policy/ legal set has been issued 

Institutional

Issued by central bank, other authority, bangkings, other monetary institution

Managed byBitcoin.co.id

Payment instrument

Physical form

Paper based & card based

Digital-based

Payment procedure

transferred & credit transfer

No transfer system

Operasional mechanism

Clearing system & fund transfer via RTGS

-

Source : primary data, processed, 2018

Virtual money (cryptocurrency) using bitcoin offers a sophisticated technology alternative, so if it is successfully applied as toll payment in Indonesia then efficiency can be achieved:

     Efficiency that can be achieved with Bitcoin & Conventional Money 

EVALUATION FACTORS

 

CURRENT ECONOMIC MONEY

BITCOIN

Security

Danger of manipulation

Quite safe because it uses cryptocurrency

Speed

More fast

Slow

Cost

Diverse 

cheaper because it is not through a third people

Compatibility

Not all service areas can support each other

All banking service providers can synchronize customer date using shared ledger concept

Convenience

Quite easy and quick to make transactions

Faster than the current electronic money to enter public address for the purpose of sending funds

                                                                              

Source: Primary data, processed, 2018

 

From the results of the above discussion, it can be concluded that conventional money and digital money can be used as a means of payment of e-commerce (online shopping) in the millennial era today. In 2009, the bitcoin exchange rate soared as demand for bitcoin in the current millennial era is supported by the concept of bitcoin. Bitcoin is able to cut costs used to pay third parties in conventional sale and purchase transactions.

Conventional money can be used as an tool of payment in e-commerce because it is clearly legal according to Law no. 7 of 2011 About Currency. While bitcoin can be used as an instrument of payment in developed countries, namely Singapore, because the user's security has already been legalized by Monetary Authority of Singapore (MAS), high has issued regulations to regulate bitcoin virtual money in Singapore. Indonesia should also apply policies for digital currencies such as bitcoin to ensure user safety and it can be more effective in e-commerce payments for Indonesia to be more advanced in the future. Because now, the development of technology is increasing rapidly with the demand for bitcoin as a instruments of payment in addition to the use of conventional money.

 

Bitcoin as the legitimate payment instrument in Singapore (Comparative)  

Bitcoin ownership is not prohibited by the government, nor do transactions using bitcoin are obtained by mining. The Singapore government has previously stressed that virtual money is not a legal instruments of payment because it does not comply with the security set forth in the prevailing Se -- tor ship and Futures Act in the country, but sees an increasingly sophisticated economy affecting this virtual payment tool in March 2014 Monetary Authority of Singapore (MAS) issued a regulation to regulate bitcoin virtual money in Singapore to avoid alleged such as money laundering and terrorism. The authorities have reminded bitcoin users in Singapore of the risks involved in using bitcoins and have stated that virtual payment instruments are considered to be service providers that will become the subject to GST (Goods and Services Tax).

In Singapore since the beginning of  2014 the taxation setting for bitcoin taxes has been applied in the official website of the www government. iras.gov.sg states that "Corporate  that choose to accept virtual currencies such as Bitcoin for their remuneration or revenue are subject to normal income tax rules. They will be taxed on the income from Singapore. Tax deduction will be permitted, where permissible, under our tax laws. From the above statement any form of sale and purchase that receives virtual money such as bitcoin as a means of payment will be taxed on income earned or earned in Singapore under Singapore Tax laws.