The Philippines is poised to launch a central bank digital currency (CBDC) within the next two years, following the lead of other regulators who have introduced such digital assets to counter the volatility of cryptocurrencies and offer an alternative means of payment and asset storage.
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. has expressed the decision to focus on developing a wholesale CBDC for the domestic market, whilst eschewing the use of blockchain or distributed ledger technology.
Remolona emphasised that while other central banks have experimented with blockchain technology, it did not yield favourable results. The BSP’s approach will involve implementing a “wholesale” CBDC, where banks will serve as the primary counterparties, facilitating retail access through them.
The BSP sees wholesale CBDC as a means to enhance the efficiency, security, and resilience of both domestic and cross-border payments. This system would offer banks an additional avenue, besides reserves, to deposit funds with the BSP for use in real-time interbank transactions and settlements.
While retail CBDC could potentially provide the public with a secure alternative to traditional bank deposits and bolster electronic payment systems, the BSP recognises the risks associated with it, including disintermediation and increased central bank influence.
Remolona reiterated the BSP’s decision to focus solely on wholesale CBDC, affirming its feasibility within his term as governor and drawing inspiration from successful implementations in other jurisdictions.
Drawing parallels with the Swedish experience with the e-krona and China’s ongoing digital yuan project, Remolona highlighted the use of the Philippine Payment and Settlement System, owned and operated by the BSP, as the chosen technology for the CBDC.
