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The Philippines central bank, or Bangko Sentral ng Pilipinas, is preparing to launch a Central Bank Digital Currency (CBDC) in the next two years to counter the rising use of crypto in the country, according to local media reports.
Central Bank Governor Eli Remolona Jr. announced the plan on Feb. 12 and said the regulator intends to focus on a wholesale CBDC rather than a retail one. He added that the central bank has decided to forgo using blockchain technology for the project.
Remolona Jr. said that the central bank’s intention is to offer a stable and regulated digital currency that enhances the efficiency of domestic and cross-border payments.
CBDCs vs. Crypto
The initiative aims to address the rising interest in cryptocurrencies by providing a more regulated alternative.
The wholesale CBDC model is preferred for its potential benefits to the banking sector’s operational efficiency, specifically for real-time interbank transactions. This approach is seen as a way to minimize the risks associated with retail CBDCs, such as financial destabilization during crises.
Internationally, the development of CBDCs has been met with mixed reactions. Financial watchdogs recognize the potential for CBDCs to improve payment systems and reduce fraud risks. However, concerns remain regarding privacy, government surveillance, and ensuring equitable access across all demographics.
The Bank for International Settlements (BIS) recently noted that while experiments with wholesale CBDCs have been conducted by various central banks, the improvements over current systems have been modest.
However, the BIS has nonetheless decided to make CBDCs a significant part of its 2024 strategy, along with the tokenization of financial and real-world assets.
Privacy concerns
The adoption of CBDCs raises questions about privacy and inclusivity, with advocacy groups like the Electronic Frontier Foundation (EFF) calling for measures to protect individual rights and ensure broad accessibility.
The global trend towards CBDCs, with countries like Sweden and China advancing their projects, offers valuable insights for the Philippines in its own development process.
Governor Remolona mentioned learning from Sweden’s CBDC efforts and indicated that the Philippines’ CBDC would utilize the Philippine Payment 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. The initiative reflects a careful approach to adopting new financial technologies, balancing innovation with risk management.
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