Governor of BSP announces plans for digital currency in the Philippines: What does this mean for the financial system?

The Governor of BSP Announces Plans to Introduce Central Bank Digital Currency in the Philippines

Governor Eli Remolona of the Bangko Sentral ng Pilipinas (BSP) has unveiled ambitious plans to introduce a wholesale central bank digital currency (CBDC) in the coming years. This decision aims to enhance the Philippines’ financial system by advancing digital payment technologies, focusing on increasing access to financial services for non-banked citizens, as well as micro, small, and medium-sized enterprises (MSMEs).

A New Era of Digital Payments

The CBDC to be introduced by BSP will not utilize blockchain technology but will operate on the central bank’s payment and settlement system. An important point to note is that the digital currency will be based on a wholesale approach, with mediation through banks, to help avoid potential issues associated with a retail approach.

Advancements in Digital Payments in the Philippines

Currently, the Philippines are experiencing a rapid increase in digital payments, accounting for as much as 42.1% of digital retail transactions in 2022. In this context, BSP has launched the Paleng-QR Ph Plus initiative to promote digital payments in the public sector using QR technology, as well as Bills Pay Ph, aimed at streamlining the bill payment system in the country.

Innovations in the Financial Sector

In November 2023, the Philippine Bureau of the Treasury announced an ambitious plan to issue 10 billion pesos (approximately 179 million dollars) in tokenized treasury bonds for the year. Surprisingly, this issuance was set to take place through an innovative approach rather than the traditional bond auction.

Digital Transformation in 2024-2026

BSP shows no signs of slowing down and is already announcing the next stage of development in digital payments as part of the planned digital transformation for the years 2024-2026. The Philippine financial sector is therefore facing fascinating challenges and opportunities that could result in significant changes in the way the country’s payment and settlement system operates.