The Philippine central bank plans to launch a digital currency within two years, offering a safer alternative to cryptocurrencies. The CBDC would use the Peso Real-Time Gross Settlement System, governed by the National Payment Systems Law, instead of blockchain. The bank’s Governor, Eli Remolona Jr, claims that the CBDC is an answer to private cryptocurrencies, citing the successful test of the Chinese e-CNY.
The Philippine central bank, Bangko Sentral ng Pilipinas (BSP), plans to launch a central bank digital currency (CBDC) within two years. The bank wants to complement physical cash and offer a less risky alternative to cryptocurrencies. The BSP Governor said he will launch a central bank digital currency that will not rely on blockchain.
CBDCs are digital tokens issued by central banks. Retail CBDCs can be used by the general public, while wholesale CBDCs are exclusively for institutional use. The central bank of the Philippines began an exploratory study on CBDCs in 2020. The Bank for International Settlements, which coordinates among central banks around the world, said in November that institutions are not sufficiently prepared for the risks posed by CBDCs.
Philippines Will Launch a CBDC but without Blockchain
The BSP will initially offer the tokenized currency to commercial banks, with the goal of improving the efficiency, security and robustness of domestic and overseas payments.
According to the BSP Governor, Eli Remolona Jr, the bank will not implement the CBDC using blockchain infrastructure. Instead, it will use the Real-Time Gross Settlement System in Pesos, already regulated by the National Payment Systems Law. The Law establishes the regulatory framework for the exchange of funds by institutions:
“Other central banks have tried blockchain, but it hasn’t gone well,” Remolona said.
He added that, similar to Sveriges Riksbank’s approach, the Philippine CBDC would complement cash, not replace it. The Swedish central bank clarified this in a bulletin published in December 2023.
How Countries Are Implementing Cryptocurrencies with CBDC
Remolona also explained that the new CBDCs would be his bank’s answer to private cryptocurrencies. He cited that China has demonstrated the viability of a wholesale CBDC with its e-CNY tests.
China and several other countries have implicitly made crypto transactions unviable by promoting CBDCs or suppressing cryptocurrencies through harsh regulations.
India’s system taxes private crypto holders with a 30% tax burden. Recently, the government has launched a heavily supervised CBDC.
In January 2023, crypto advocate Nic Carter highlighted the covert efforts of White House financial regulators to stifle crypto. In the midst of the 2023 US banking crisis, a former US congressman accused regulators of closing one of the affected banks for political reasons.
The New York State Department of Financial Services denied targeting Signature for its crypto business line. Even in Hong Kong, where cryptocurrency regulations were launched with much fanfare in June, cryptocurrency companies must comply with rules that some have considered unworkable.
In February 2023, the Bank of England and HM Treasury released a consultation paper outlining the case for a digital pound. The paper concluded that it is too early to decide whether to introduce the digital pound but that preparation towards that decision is ongoing.
The Monetary Authority of Singapore has also pushed its own tokenized payments mechanisms while discouraging, although not explicitly prohibiting, retail trading.
In short, the Philippines is taking steps to address the changing digital finance landscape and provide a reliable and secure alternative to cryptocurrencies.
By Leonardo Perez
