The Philippines is inching closer to issuing a regulated, centralized digital peso after its central bank announced a pilot run called Project CBDCPh.
The Covid-19 pandemic proved a turning point for the bank in highlighting how digital currencies can benefit government cash assistance programs.
Benjamin Diokno, Governor of the Bangko Sentral ng Pilipinas (BSP), said: “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.”
The introduction of a Central Bank Digital Currency (CBDC), he said, “Can support efficient implementation of wide-scale targeted government cash assistance programs.”
Governor Diokno noted a number of Association of South-East Asian Countries (ASEAN) have already launched their own versions of Central Bank Digital Currencies (CBDC). And interest has also been shown by the International Monetary fund (IMF) and the Asian Development Bank (ADB).
“These institutions are coming up with deep-dive research and initiating policy discussions that aim to contribute to the emerging framework for adoption of a CBDC, as a potential game-changer of the international monetary system,” he added.
The Central Bank 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 said.
Introduction of digital peso may require legislation
The governor also warned that a CBDC will raise legal issues and may need legislation, particularly if it involves the BSP directly distributing funds to the public, as this is not covered by the bank’s existing 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 came during the joint BSP-AFI Virtual Knowledge Exchange Program-3, jointly organized by the Bangko Sentral ng Pilipinas and the Alliance for Financial Inclusion last week.
Last month, Diokno had stated there were no plans to introduce a CBDC in the near term because the population remains heavily reliant on cash.
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