[ad_1]
THE Bangko Sentral ng Pilipinas (BSP) remains undecided on whether it will issue its own central bank digital currency (CBDC) in the future, BSP Governor Benjamin Diokno told reporters on Thursday.
This, after the local Central Bank recently completed its exploratory study on CBDC. The research was conducted by a composite technical working group.
“There are a growing number of central banks engaged in some kind of groundwork on CBDC. Many of them are conducting conceptual research, like us, while some have progressed to proof-of-concept experiments. A smaller number of central banks have already been developed and are in the pilot testing stage of their CBDC, ”said Diokno.
This month, China wrapped up its pilot program for its own central bank-backed digital currency. The country’s digital currency is expected to help track the flow of funds in the economy and address some money laundering risks.
The US Federal Reserve also said that they are currently assessing their own financial and economic conditions on how a central bank-backed digital currency can fit into their systems.
“A central bank’s digital currency is fundamentally different from privately issued digital currencies or cryptocurrencies. Cryptocurrencies do not have any central bank to back them. Also, cryptocurrencies cannot be considered money. Given the volatility of their prices, cryptocurrencies cannot function, neither as a medium of exchange nor as a unit of account, and only investors with less aversion to risk would consider them a store of value, ”said Diokno.
“In contrast, a CBDC is a digital form of central bank money that is denominated in a national unit of account and functions as a medium of exchange and a store of value. Given the characteristics of CBDC, it is expected to be preferable to privately issued digital currencies, ”he added.
Lower impression, financial inclusion
If the BSP decides to issue its own digital currency, Diokno said this could potentially reduce the costs of printing physical cash and can help promote financial inclusion in the country.
If the BSP decides to issue a retail CBDC, this will most likely result in less banknote printing. This, in turn, leads to a lower paint cost for BSP. The BSP decision and the money paint change on several factors, the main of which is the demand for physical currency. Currently, cash remains the preferred means of payment for retail transactions in the Philippines.
Diokno also said that it will potentially promote financial inclusion as it provides another means of conducting financial transactions and could encourage innovation in the payments system as it presents another form of competition with privately issued digital currencies.
The BSP governor, however, noted that despite these developments, very few central banks plan to issue CBDCs in the next five years. “This is based on surveys conducted on the CBDC activities of central banks,” he said.
For the BSP, Diokno said they will continue to study and weigh the benefits and risks of CBDCs for the Philippines. The developments they hope to make in the coming years include additional research, capacity building, and establishing more networks.
‘Not within my deadline’
When asked if the BSP will start issuing CBDC or if it will show some form of readiness to issue its own digital currencies within its term, Diokno said: “The end of my term is 2023. I don’t think so. Most central banks say they will not issue CBDCs in the next 5 years, so not within my mandate. “
