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The Philippines Set to Launch Pilot Central Bank Digital Currency

Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, has announced its intentions of launching a pilot Central Bank Digital Currency (CBDC) in the near future. To start the ball rolling, it formed Project CBDCPh, a research team focused on studying and making the matter a reality.

In his recent speech addressing a delegation of central bank governours of the region in a three-day virtual summit on CBDCs, BSP Governor, Benjamin Diokno, discussed the central bank’s digital initiatives and highlighted Project CBDCPh. As a next step, the BSP targets to roll out in the near term, a pilot CBDC – Project CBDCPh. The project aims to build organisational 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, he said.

Moreover, BSP’s top executive outlined how much economies inside and outside the region have geared themselves towards the development of CBDCs. He acknowledged that there has been plenty of interest in CBDC projects globally. According to an analytical note released by the ASEAN+3 Macroeconomic Research Office (AMRO) as of December 2021, these developments include:

  • 3 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
  • Another 40 countries are currently undertaking research on CBDCs.

Moreover, Diokno disclosed that the BSP for its part has initiated an exploratory study in 2021 to inform a more collaborative and comprehensive investigation of CBDC’s nature and implications for the whole financial system. Plus, 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.

And the BSP Governor is quick to put things in context. While the government recognises the potential financial inclusion benefits of CBDCs, they also acknowledge that CBDC issuance does not necessarily address the root causes of financial exclusion. Barriers to financial inclusion are multi-dimensional which include:

  • Infrastructure issues
  • Socio-economic issues
  • Cultural issues

Further, Diokno cites behavioural factors that require cross-cutting and well-coordinated policy interventions as another factor that would add to that challenge. But a new course study for a digital currency via its Project CBDC-Ph should overcome all these and be able to set things in motion for the country’s CBDC in the near future.

The Philippines is one of Asia’s emerging economies that is shifting from the agricultural market to the services and manufacturing industry. The good news is Governor Benjamin Diokno indicated CBDC is inevitable for the country as other economies of scale have shown.

The Republic of the Philippines has in the past two years struggled with the COVID-19 crisis. As a precautionary measure, the country has had to impose a series of border restrictions and lockdowns that were seen as severe but necessary to protect its people from contracting COVID-related illnesses. Consequently, there may not be a greater rationale for the use of fiat money than the pandemic itself.

In the race to be a digital powerhouse of the region, the Philippines has shown that it is willing to do what it takes to get its digital transformation going. Like many democracies in Asia, the Pacific archipelago is encountering a lot of challenges. Foremost of which is the leadership transition set to happen this year as the national elections are on their way this 9 May.

As OpenGov Asia has reported, in a first in the history of Philippine national elections, the country’s election commission is partnering with a tech company to help guide voters to fact-check information regarding the upcoming May 9 polls. It will do this by providing key data about the election on the company’s video-sharing platform, one of the major social media platforms used in the country.

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