Bangko Sentral ng Pilipinas No Plans on Launching Digital Currency Soon

According to Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno, the chances of the BSP to release its own central bank digital currency (CBDC) in the near future are slim. At the moment, the central bank is focusing its efforts on bolstering the the domestic retail payment system.

“The BSP has no plans to introduce a CBDC in the near term primarily because the population remains heavily cash reliant given the country’s efficient and effective payment and settlement systems,” explained Diokno. A technical working group within the BSP had already looked into the use cases of a CBDC after consulting with other central banks, technological service providers, other institutions, as well as small businesses.

“Exploratory works on identified uses cases for CBDC in the Philippines are currently being undertaken for cross-border payments, settlement of equity securities, and intraday liquidity facility,” he added. By 2023, the BSP anticipates that at least 50% of transactions will be done online following the rise of digital payments to 20% in 2020.

CBDCs are less prone to price volatility granted that these are centralized, issued, and regulated by a central bank as opposed to usual cryptocurrencies which are decentralized. A CBDC can also serve as a medium of exchange recognized by the government. China and Europe’s central banks have likewise begun the development of their respective CBDCs while India is expecting to launch its own digital rupee in the near future.

The Economist Intelligence Unit industry manager Swarup Gupta believes that the Philippine Identification System (PhilSys) or the national ID will serve as an essential factor in issuing a CBDC. This was the case in India where Aadhar, similar to the national ID project in the Philippines, helped the country prepare for the launch of its retail CBDC.

“The Philippines’ digital identity project, PhilSys, will ultimately resolve these issues, but it will be a while before substantial coverage is achieved and requisite digital public goods put in place,” discussed Gupta. Over 50 million Filipinos have already accomplished the demographic and biometric data collection for the national ID, according to the National Economic and Development Authority (NEDA).

However, Gupta also affirms that there are considerable challenges that need to be addressed in relation to CBDC adoption. “A gaping digital divide in poor areas of emerging Asia, which includes the likes of both India and the Philippines, could hinder a major objective of such projects: financial inclusion. The major risks of launching a CBDC include raising the importance of the central bank to the point of crowding out the innovation of private players.”

Source: BusinessWorld