The Central Bank of the Philippines Plans to Introduce Central Bank Digital Currency (CBDC)
The Central Bank of the Philippines, Bangko Sentral ng Pilipinas (BSP), has announced plans to launch a Central Bank Digital Currency (CBDC) within the next two years. This decision was declared by BSP Governor, Eli Remolona Jr., on February 12 of this year. It is worth noting that BSP intends to introduce a wholesale CBDC model, rather than a retail one, meaning that it will primarily be accessible through banks rather than directly to individual customers.
Absence of Blockchain Technology in the Planned CBDC
It is important to emphasize that unlike many other digital currency projects, BSP has chosen not to utilize blockchain technology in creating the CBDC. Instead, the planned CBDC will be based on the central bank’s payment and settlement system, which represents an innovative approach in the development of digital currencies.
Introducing CBDC in Response to Growing Interest in Cryptocurrencies
The launch of the Central Bank Digital Currency is BSP’s response to the increasing interest in cryptocurrencies and evolving market needs. Drawing inspiration from Sweden and China, where the possibility of introducing CBDC is also being considered, BSP aims to complement traditional payment forms, such as cash, and compete with the rapidly expanding cryptocurrency market.
Benefits and Implications of Introducing CBDC
The objective of introducing the Central Bank Digital Currency includes enhancing operational efficiency in the banking sector, especially in conducting real-time interbank transactions. However, it should be noted that despite the international interest in CBDC development, there are discussions and concerns regarding implications such as privacy issues, government supervision, and equal access for diverse demographic groups.
Analysis by the Bank for International Settlements (BIS) and the Financial Sector Response
The Bank for International Settlements (BIS) has observed that experiments with wholesale Central Bank Digital Currencies conducted by various central banks have brought relatively modest improvements over existing systems. Nevertheless, the introduction of CBDC could represent a step forward in advancing modernity and efficiency in the financial sector, especially given the increasing number of online transactions.
Controversies in the Cryptocurrency Sector in the Philippines
It is also noteworthy that in December 2023, the Philippine Securities and Exchange Commission confirmed the ban on the cryptocurrency exchange Binance operating in the country. This decision highlighted the challenges of enforcing compliance with regulations in the cryptocurrency sector in the country, posing a significant challenge for the regulation and supervision of the digital asset market.