Update April 29, 2022: BSP To Pilot CBDC for Wholesale Transactions
By Nath Cajuday
The Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno announced that the Central Bank is targeting to roll-out a pilot Central Bank Digital Currency (CBDC) implementation named Project CBDCPh.
A CBDC is digital currency centralized, issued, and regulated by a central bank which can serve as a medium of exchange or store of value. It is basically the digital form of traditional money of a national bank. Unlike cryptocurrencies, CBDC is regulated by a country’s central bank, governed in terms of supply and value by a country’s monetary policies, trade surpluses, and more.
“According to an analytical note released by the ASEAN+3 Macroeconomic Research Office (AMRO) as of December 2021, three central banks have launched CBDCs for commercial use; 14 countries have launched or completed pilot testing of CBDCs; 16 are in stages of development or proof-of-concept stage; while another 40 countries are currently undertaking research on CBDCs,” said Diokno, implying that there has been a plenty of interest in CBDC projects globally.
The BSP Governor also stressed that even global and regional multilateral institutions like the International Monetary Fund (IMF), the Bank for International Settlements (BIS), the Asian Development Bank (ADB) are also looking into CBDCs.
“These institutions are coming up with various deep-dive research and initiating policy discussions that aim to contribute to the emerging framework for adoption of a CBDC, as a potentially game-changer of the international monetary system,” Diokno added.
Aiming to build organizational capacity and hands-on knowledge of key aspects of CBDC that are relevant for a use case around addressing frictions in the national payment system, project CBDCPh is set to launch in the near term, he stressed.
In addition, the Central Bank already started a study about CBDC’s nature and implications for the whole financial system last year.
“A national payment system assessment was later conducted which resulted in the identification of relevant use cases of wholesale CBDC aimed at enhancing the payment system’s safety, resiliency, and efficiency,” Diokno added.
Recognizing the potential magnitude and scale CBDCs impact an economy with, he stressed that financial inclusion through things such as universal accessibility, efficiency gain, or cost reduction, is beneficial when the digital currency is implemented.
“We have witnessed during the pandemic how account-based distribution of financial assistance has been widely used by governments to provide immediate support to the most vulnerable segments of society. Universally accessible CBDCs can support efficient implementation of wide-scale targeted government cash assistance programs,” said Diokno.
However, BSP also acknowledged that CBDC will not necessarily address the root causes of financial exclusion; barriers to financial inclusion are multi-dimensional, involving infrastructure, socio-economic, cultural, and behavioral factors that require cross-cutting and well-coordinated policy interventions.
The Central Bank Governor also disclosed that CBDC will bring in some legal issues, clarifying that the issuance of retail CBDCs may require legislation, particularly if it involves BSP directly distributing CBDC to the public, which is not contemplated in the existing BSP charter.
“In addition, monetary authorities and regulators will need to build the requisite skills and technological capacity to effectively implement and manage the risks of CBDC issuance,” Diokno emphasized.
The announcement was specified by the BSP Governor during the joint BSP-AFI Virtual Knowledge Exchange Program-3 (KX3) jointly organized by the Bangko Sentral ng Pilipinas and the Alliance for Financial Inclusion last March 1, 2022.
Last month, Diokno also stated that 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, according to GlobalSource Partners
“We could say that CBDC may be an idea whose time has come, but certainly it has many aspects that need to be better understood,” Diokno concluded.
This article is published on BitPinas: BSP To Pilot Central Bank Digital Currency Project
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