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Countries have begun taking various steps to keep up with innovations in financial technology and integrate into the digitalization trend. Most recently, the Philippines Central Bank’s (BSP) initiation of controlled trials for PHPC, a national stablecoin pegged 1:1 to the local peso, stands out as an interesting move.
Pilot Applications for Stablecoin Begin
BSP’s approval of a pilot application for PHPC, a Philippine Peso-backed stablecoin, in collaboration with crypto wallet provider Coins.ph, indicates an increase in investments and innovations in the financial technology sector in the country. This pilot application will take place within the BSP’s Regulatory Sandbox Framework. Thus, the trials will be conducted in a controlled environment, and efforts will be made to minimize possible risks.
During this pilot application process, Coins.ph will maintain cash reserves in pesos equivalent to the circulating supply of the PHPC stablecoin. This step aims to facilitate the conversion of the stablecoin back to physical fiat currency. The test also aims to evaluate PHPC’s real-world performance, its impact on the local fiat ecosystem, and potential use cases.
What Are the Potential Use Cases?
Potential uses for PHPC include domestic and cross-border payments, trading with other crypto assets, hedging against market volatility, and providing collateral and liquidity in DeFi applications. The success of this stablecoin will be determined not only by its transition from the sandbox trial environment to real-world usage but also by the central bank’s final evaluations and approvals for an official public distribution.
However, depending on the complexity of local regulations, the transition process from the pilot application to an official public distribution can vary between three to twelve months. Therefore, it is important to note that no official deadline has been announced with the announcement of the stablecoin experiment.
A Significant Step on the Path to Digitalization
The launch of PHX, the first example of stablecoins backed by the Philippine peso, by a local commercial bank, Unionbank, in July 2019, is seen as a reflection of the country’s efforts to promote digital financial inclusion. PHX can be used seamlessly against pesos and later deposited back into users’ UnionBank accounts.
All these steps reflect the Philippines’ determination to accelerate its progress in the field of financial technology and its digitalization process. BSP’s trials of the PHPC stablecoin represent a significant step in strengthening the country’s financial infrastructure and adapting to the digitalization trend.
