Philippines to launch CBDC within two years to respond to growing cryptocurrency use
The Central Bank of the Philippines is preparing to launch a central bank digital currency (CBDC) within the next two years to address the growing use of cryptocurrencies in the country, according to local media reports.
Central bank governor Eli Remolona announced the plan on February 12 and said regulators plan to focus on wholesale CBDC rather than retail CBDC. He added that the central bank has decided to stop using blockchain technology for the project.
Remolona Jr. said the central bank’s intention is to provide a stable and regulated digital currency that improves the efficiency of domestic and cross-border payments.
CBDC and cryptocurrency
The initiative aims to address the growing interest in cryptocurrencies by providing a more regulated alternative.
Wholesale CBDC models are preferred because of their potential benefits to the operational efficiency of the banking sector, especially in real-time interbank transactions. This approach is seen as a way to minimize the risks associated with retail CBDCs, such as financial destabilization in the event of a crisis.
Internationally, the development of CBDCs has drawn mixed reactions. Financial watchdogs are recognizing the potential of CBDCs to improve payment systems and reduce fraud risks. But concerns remain about privacy, government surveillance, and ensuring equitable access across all demographics.
The Bank for International Settlements (BIS) noted that although various central banks have recently conducted experiments with wholesale CBDCs, the improvements to the current system are minimal.
However, BIS has nevertheless decided to make CBDC an important part of its 2024 strategy, along with the tokenization of financial and real assets.
Privacy Issues
The adoption of CBDCs raises questions about privacy and inclusivity, with advocacy groups such as the Electronic Frontier Foundation (EFF) calling for action to protect individual rights and ensure broad accessibility.
The global trend toward CBDCs, with countries such as Sweden and China advancing projects, provides valuable insight into the Philippines’ own development process.
Governor Remolona cited lessons learned from Sweden’s CBDC efforts and said the Philippines’ CBDC will leverage the Philippine Payments and Settlement System (PhilPaSS) to enhance transaction security and mitigate fraud risks.
As the Philippines moves forward with its CBDC project, it contributes to the broader discussion on the role of digital currencies in the financial sector. This initiative reflects a cautious approach to adopting new financial technologies and balancing innovation and risk management.