The Bangko Sentral ng Pilipinas (BSP) will continue to study and strengthen capacity building on central bank digital currency (CBDC) but is unlikely to issue them within the short to medium term, according to BSP Governor Benjamin E. Diokno.
“The end of my term is 2023. I don’t think so. Most central banks said they will not issue a CBDC within the next five years so not within my term,” Mr. Diokno said in an online briefing on Thursday.
Despite this, Mr. Diokno said the BSP is keen to explore CBDCs.
“We will continue with our research. This could be done on the current payment system, including possible areas for improvement; privately-issued digital currencies in the Philippines, covering their business models and the crafting of regulations using industry sandboxes; and CBDC developments among central banks,” he said.
Mr. Diokno said they will also tap possible technical assistance from institutions such as the International Monetary Fund or the Bank for International Settlements and look into consulting with other central banks to boost the BSP’s knowledge on CBDCs.
CBDCs differ from cryptocurrencies as the latter are prone to price volatility, Mr. Diokno said.
“By contrast, a CBDC is a digital form of central bank money that is denominated in a national unit of account and functions as both a medium of exchange and a store of value,” he said. “Given these features of CBDC, it is expected that it will be preferred than privately-issued digital currencies.”
Based on the BSP’s exploratory assessment, benefits of CBDCs include the facilitation of financial inclusion and a possible decline in cash usage, an additional option for monetary policy tools, as well as boosting competition and innovation in the payments system.
“Some central banks are also engaging in CBDC activities as part of contingency planning. This fosters readiness in the event that the payment environment necessitates the adoption of a CBDC,” Mr. Diokno said.
On the other hand, risks that may arise from CBDCs include a loss of privacy for consumers, increased costs in the banking system due to possible competition between bank deposits and CBDCs, and threats of money laundering, terrorism financing, as well as cybersecurity issues.
So far, some countries engaged in some forms of CBDC activities and pilot tests include China, Marshall Islands, Sweden, Bahamas, and the Easter Caribbean. — LWTN