BSP says more groundwork needed before it can issue digital currency

BSP Gov. Benjamin Diokno. INQUIRER file photo

MANILA, Philippines — The central bank recently completed its study on digital currencies as a potential future alternative to the current system of physical peso bills as a medium of transferring value, but the country’s chief monetary regulator said it is unlikely than one will be introduced in the near term.

In a press briefing, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said planners who took a close look at the proposed central bank digital currency recommended continuing research, capacity-building, and the establishment of networks with central banks and institutions that are also conducting research on this scheme.

“The initiative is aimed at enabling the BSP to keep pace with, and to enhance its readiness to adjust and evolve amid rapid technological developments,” Diokno said, adding that its introduction will likely happen beyond his current term.

The study is exploratory in nature. It is in line with BSP’s Digital Payments Transformation Roadmap which aims to convert at least 50 percent of retail payments into digital form and that at least 70 percent of adult Filipinos should have a bank account by 2023.

According to the study, continuing research could be done on the current payment system, including possible areas for improvement; privately- issued digital currencies in the Philippines, covering their business models and the formulation of regulations using industry sandboxes; and digital currency developments among central banks.

Capacity building, meanwhile, may be done through workshops or roundtable discussions conducted by other institutions and subject matter experts, or actual immersions in digital currency projects.

The BSP may also benefit from a technical assistance from international institutions such as the International Monetary Fund or the Bank for International Settlements.

Moreover, to establish networks, the study said BSP can consult with peer central banks for updates on their digital currency-related research; or consider collaborative experimentation with central banks, financial institutions or international organizations performing similar research or related initiatives.

The BSP’s exploratory study, which was carried out by a composite technical working group, covered the basic concepts and issues surrounding digital currencies and implications and risks from the perspectives of monetary policy, financial supervision, payments and settlement, and financial inclusion, as well as laws and regulations.

It also presents the experiences of other central banks which undertook related research initiatives on digital currencies.

Diokno stressed that the current crop of digital currencies proliferating online are, by nature inferior, to any digital currency that will be issued by the central bank. This is especially so since a central bank-issued digital currency will be an officially recognized method of storing value that will be, by law, acceptable as payment for goods and services, among others.

JPV