BSP rules out cash demonetization plan

Demonetizing P500 and P1,000 bills to curb corruption remains off the table, according to Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr.

Speaking at a Tuesday meeting of the Management Association of the Philippines, Remolona said the proposed reform would put honest Filipino workers and businesses at a disadvantage.

“In our case, it turns out that the P1,000 bill is used extensively, especially in the provinces, by legitimate businesses,” he said. “So we looked into it. We decided it actually doesn’t make sense. The numbers don’t make sense.”

Initially proposed last year by former Finance Secretary Cesar Purisima, demonetization involves removing large-denomination bills, such as P500 and P1,000 notes, from circulation. Purisima argued that higher-value bills are often used in illicit activities, including money laundering, citing testimony from former Bulacan 1st District Engineer Brice Hernandez, who claimed he delivered over 20 suitcases allegedly containing around P1 billion in cash to fugitive ex-Congressman Zaldy Co.

Remolona, who also chairs the Anti-Money Laundering Council (AMLC), pointed to international case studies to illustrate the risks of such a policy.

“In India, it was a disaster. In fact, it led to the resignation of the governor of the central bank,” he said.

On 8 November 2016, India demonetized ₹500 and ₹1,000 notes — then accounting for about 86 percent of cash in circulation — to curb untaxed income, counterfeit currency, and terror financing. However, 99.3 percent of the demonetized notes were eventually returned to the banking system, undermining the reform’s objectives.

The abrupt move disrupted India’s cash-heavy economy, contributing to a slowdown in growth and a spike in unemployment the following year. Small businesses were particularly affected, with 70 to 80 percent reporting sharp sales declines in the months after the policy was implemented.

Remolona, who previously worked at the Federal Reserve Bank of New York for 14 years, noted that similar debates have occurred in the United States regarding the $100 bill’s use in illegal activities. While criminals may favor large bills, he said they are also widely used by ordinary citizens for legitimate transactions.

The same presentation also saw Remolona state that anomalous flood control project disbursements shaved about 0.3 percentage points off 2025 GDP growth. He added that the AMLC has frozen around P25 billion in assets linked to individuals and entities implicated in the “floodgate” controversy — a figure he expects to rise as investigations continue.

“I think you can expect more. But the problem is we can only act if the money is in the banking system,” Remolona said. “Money moves fast. It can be stored in someone’s basement, then put on a plane and delivered to Hong Kong.”

He noted the AMLC’s jurisdictional limitations, while reiterating the BSP’s support for reforms to bank secrecy laws to strengthen anti-money laundering efforts.