Philippines Could Have Its Own Digital Currency Like China

The Philippine Central Bank has formed a technical working group that would study the implications of creating a central bank digital currency (CBDC).

In an interview, Governor Benjamin Diokno of the Bangko Sentral ng Pilipinas (BSP), the country’s central bank, said the technical working group (TWG) will study the feasibility and possible implications of a Peso CBDC. “We have to first look at the findings before making a decision,” Diokno said. The team is expected to release preliminary findings next month.

A CBDC is a legal tender in digital form issued and managed directly by the central bank and backed by its reserves.

A number of countries and their central banks have been studying CBDCs. China currently leads the space as it already piloted its own version of Virtual Yuan in key cities. Analysts predict China will be the first to launch its CBDC domestically, which it can use as leverage for international trade. But the People’s Bank of China said pilot testing CBDC does not mean it’s ready to launch soon.

The Bank of Thailand (BOT) is also pilot testing its Baht Digital Currency in transacting with the Hong Kong Monetary Authority and with some large businesses. BOT Assistant Governor Vachira Arromdee said it is studying CBDC more carefully before launching it to the general public.

Macro investor and economic historian Raoul Pal says central banks are rushing to create digital currencies to give them the ability to run the financial system without banks. He cited banking indexes of the U.S., Japan , the U.K. and EU banks which are all near historic lows.

In 2018, the late-BSP Governor Nestor A. Espenilla Jr. also mentioned that the central bank was studying CBDCs in terms of what it could do to the supply of credit and impact on the country’s financial system. The Securities and Exchange Commission (SEC) has expressed support and was working closely with the BSP on the subject. At the time, Espenilla Jr. said they were looking to issuing something similar to Bitcoin but issued by a central bank.

Both Bitcoin and CBDCs are only similar in how they are issued – through a distributed ledger technology (DLT) like the blockchain. While Bitcoin’s blockchain is public, the CBDC would most likely be issued in a private distributed ledger, said the Bank of International Settlements, the central bank of all banks of which the BSP is a member.

Diokno said he does not think digital currencies will affect demand of fiat money for now. Citing cryptocurrencies, he said the central bank has always viewed the subject beyond the assets themselves. “It is more on the blockchain technology that underpins it,” he added.