Instead of building on a decentralized blockchain network, the Philippine government has opted to develop a central bank digital currency to introduce digital assets in the country.
BSP to Introduce CBDC Within 2 Years
The Philippines’ central bank, Bangko Sentral ng Pilipinas (BSP), has announced plans to launch a Central Bank Digital Currency (CBDC) within the next two years. This move is aimed at providing a stable and regulated alternative to the volatile cryptocurrency market.
Unlike typical digital currencies, the Philippine CBDC will not rely on blockchain technology. Instead, it will utilize the Peso Real Time Gross Settlement System under the National Payment Systems Act.
Retail vs. Wholesale CBDCs
Reports indicate that the BSP is likely to introduce a wholesale CBDC, which is primarily intended for institutional use. This approach is seen as a means to enhance the efficiency and safety of domestic and cross-border payments.
Retail CBDCs are intended for use by the general public, while wholesale CBDCs are reserved for institutional purposes. The BSP’s decision to focus on a wholesale CBDC reflects considerations regarding financial stability and the potential risks associated with retail CBDCs, particularly during periods of financial stress.
CBDC Development Timeline
The BSP initiated an exploratory study into CBDCs back in 2020. However, the Bank for International Settlements has raised concerns about central banks’ preparedness to address the risks posed by CBDCs. Despite these concerns, the BSP remains committed to its CBDC development timeline.
Central Bank Governor Eli Remolona Jr clarified that the Philippine CBDC will not utilize blockchain or digital ledger technology. Instead, it aims to provide a safer digital currency option inspired by the success of China’s e-CNY.
Initial Distribution Plan
The CBDC is designed to work alongside physical money rather than replace it entirely. The initial distribution will target commercial banks, with the goal of enhancing payment systems’ efficiency and security. This approach aligns with the stance of Sweden’s central bank, which views digital currency as a complement to cash rather than a substitute.
Regulatory Landscape
The Philippines is witnessing increased regulatory scrutiny of the crypto sector. Earlier actions by the country’s securities regulator, the Philippine Securities and Exchange Commission (PSEC), against platforms like Gemini and Binance reflect growing concerns about investor protection and regulatory compliance. Globally, there is a trend towards tighter regulations surrounding cryptocurrencies, with countries like India imposing taxes on crypto transactions and exploring the introduction of CBDCs.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
