The Central Bank of the Philippines, Bangko Sentral ng Pilipinas (BSP), plans to introduce a central bank digital currency (CBDC) within two years. This is in response to the increasing demand for alternative forms of payment and the risks associated with cryptocurrencies. BSP aims to complement traditional physical cash by offering a more reliable and secure form of payment.
BSP Governor, Eli Remolona Jr., has announced that the CBDC will not be based on blockchain technology. Instead, the Philippine central bank will utilize the Peso Real Time Gross Settlement System, which already complies with the regulations set forth in the National Payment Systems Act. This approach will improve the efficiency, security, and reliability of both domestic and international payments.
While many central banks worldwide have explored blockchain technology as a potential tool for introducing CBDCs, BSP has decided to avoid using this technology, considering its drawbacks in this field.
Eli Remolona Jr. also explained that the introduction of CBDC in the Philippines aims to address the rise of private cryptocurrencies. He cited the example of China, which has conducted trials of its wholesale CBDC, the e-CNY. China and many other countries are cracking down on cryptocurrency transactions while promoting the introduction of CBDCs or imposing strict regulations on cryptocurrencies.
It is worth noting that the Philippines does not intend to replace traditional cash with the central bank digital currency entirely. BSP sees CBDC as a complement to existing forms of payment rather than a replacement.
Among other countries that have introduced their own CBDCs or are conducting tests, Sweden, India, the United States, and Hong Kong are notable examples. Each of these countries has its own goals and strategies regarding CBDCs.
In the case of India, the government recently introduced a closely monitored CBDC to seek a more controlled form of payment. In the United States, there have been reports of regulatory efforts aimed at controlling cryptocurrencies.
It is still too early to determine the full impact of central bank digital currencies on the financial and economic world. However, the growing interest and attempts to introduce CBDCs in different markets suggest that this form of payment could become a significant element of the future financial system.