BSP, the central bank of the Philippines, has recently announced that it will launch a pilot initiative for a Central Bank Digital Currency (CBDC), called project CBDCPh. It is estimated that around 40 countries are currently undertaking research on CBDCs, including the Philippines, while three central banks have launched CBDCs for commercial use.
A CBDC is a digital form of money issued by the central bank. There are two types of CBDCs: wholesale CBDCs and retail CBDCs.
Wholesale CBDCs are exclusive to financial institutions and used in transactions with central banks. Access to wholesale CBDCs is available 24 hours a day, seven days a week, unlike central bank money, which is limited to the central bank’s opening hours. Retail CBDCs cater to retail transactions, and can be used for daily transactions.
Project CBDCPh aims to provide a comprehensive outlook on the potential implication of CBDCs on the Philippines’ financial system. Its target is to identify key aspects of CBDCs and address frictions in the current national payment system, especially in areas of safety, efficiency, and reliability.
Some of the main features and characteristics of CBDCs include, anonymity, transferability through a peer-to-peer basis, wide availability, and potentially increased financial inclusion. These are important characteristics for a country like the Philippines, still largely a cash-based economy where citizens are underserved by traditional financial institutions. The BSP plans to boost the number of banked populations to 70 percent and 50 percent of payments done online by 2023.
(Sources: ASEAN Briefing; BusinessWorld)