The Central Bank of the Philippines Plans to Introduce Central Bank Digital Currency
The Central Bank of the Philippines, Bangko Sentral ng Pilipinas (BSP), has announced plans to introduce a central bank digital currency (CBDC), signifying a significant change in the country’s financial landscape. Governor Eli Remolona Jr. has announced these plans with the aim of modernizing the payment and settlement systems in the Philippines.
Plan Based on Its Own Payment and Settlement System
The BSP’s plan is based on utilizing its Payment and Settlement System, owned by the central bank itself, as the foundation for the CBDC project. In contrast to some other countries that use blockchain technology, the BSP is focusing on utilizing its existing payment system. This decision aims to avoid potential issues associated with blockchain technology.
Focus on Wholesale CBDC
Remolona emphasizes that the BSP will focus on introducing wholesale CBDC, intermediated by banks. This comes from concerns related to potential issues with retail CBDC. The central bank wants to minimize risks such as bypassing intermediaries and bank runs during a financial crisis. By focusing on wholesale CBDC, the BSP is developing solutions that will be efficient and secure for the country’s financial system.
Inspired by the Success of Other Countries
The BSP drew inspiration from countries like Sweden and China, which have introduced CBDC. These countries have achieved success, which is why the BSP sees the Philippines on a similar path. The CBDC is intended to be viewed as a digital complement to cash and a competitor to cryptocurrencies. Its goal is to modernize and streamline financial transactions in the country.
A Simple yet Effective Approach
Governor Remolona assures that the CBDC project will be implemented during his term, which will last for several more years. It is expected that the eventual implementation of CBDC will happen within the next two years. The BSP is focusing on a simple yet effective approach to expedite the implementation process and deliver modern financial solutions.
Cautious Approach to Cryptocurrencies
In the meantime, the Philippines still maintain a cautious approach to the cryptocurrency industry. The Philippine Securities and Exchange Commission (SEC) has issued a ban on unregistered platforms such as Binance to protect the local market. This is evidence that the BSP aims for responsible development of the cryptocurrency sector while controlling potential risks.
The introduction of a central bank digital currency is another step for the Philippines in modernizing its financial system. With the success of other countries in mind, the BSP hopes that the introduction of CBDC will bring benefits to the country and optimize payment and settlement processes.