BSP not issuing own cryptocurrency

Published October 20, 2019, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) is not expected to issue its own digital currency with Governor Benjamin E. Diokno has deferred all discussions in the Monetary Board pertaining to cryptocurrency.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno. (Bloomberg)
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno. (Bloomberg)

“We don’t need it,” said Diokno. He also said that a previous plan to have a central bank-issued digital currency or CBDC is now officially off the table.

Diokno said most central banks around the world are still in the observation stage when it comes to CBDCs, and most regulators are wary of being the first to set it up.

He reiterated his earlier comments about Facebook’s Libra, supposedly a “new global cryptocurrency” built on blockchain technology. “My sense is that I think most countries are 50-50 on cryptocurrency,” said Diokno, adding that most central banks may not want to do CBDCs at this time, or be too open on cryptocurrency policy.

Diokno cited current and ongoing discussions initiated by the Bank for International Settlements (BIS) on the matter which he thinks have been receiving little enthusiasm.

The BSP chief said that instead of a CBDC, he would rather pursue and promote the use of the Quick Response (QR) Code Standard and encourage the growth QR-enabled payments system in the Philippines.

In fact, the Monetary Board on October 10 approved a resolution for the adoption of a QR Code Standard and on October 17, BSP Circular No. 1055 was signed by Deputy Governor Chuchi G. Fonacier.

The BSP is allowing all payment service providers or PSPs which are banks and non-bank electronic money issuers until June 30 next year to fully comply with the QR Code provisions.

Diokno said the BSP is working closely with the Department of Transportation and Communications for an efficient QR Code system for public transportation use, namely jeepneys, buses, trains and even tricycles. “It’s much more convenient, no more (token) change,” he said in Filipino. “This is where we want to focus right now and not cryptocurrency… because (cryptocurrency) is too risky,” he added.

As early as 2017, the BSP-led Financial Stability Coordination Council has had several discussions on the possibility of a BSP digital currency which will be legal tender since it is issued by the central bank and could be used for retail transactions.

The BIS has said, however, that central banks should have in place strong anti-money laundering and counter-terrorism financing rules as well as the tax policy and authority based on existing laws to produce CBDC.

One of the reasons the BSP had earlier considered its own CBDC was because it wanted to fastt-rack the transition from a cash-heavy payments system to cash-lite.

The objective is that 20 percent of all payment transactions should be cashless by next year. Diokno is confident that this will increase to 50 percent in a few years.

“We expect e-payments to hit 20 percent of total financial transactions in the country by next year,” Diokno said in a recent forum. “We can imagine the Philippines becoming a cash-light economy, with e-payments accounting for at least half of total financial transactions in five years.”