The Philippines is advancing towards the introduction of a non-blockchain central bank digital currency (CBDC) within the upcoming two years, according to the Governor of Bangko Sentral ng Pilipinas (BSP), Eli Remolona.
The initiative, unveiled on Feb. 12, follows global trends where regulators are exploring digital tokens as a secure payment method and a stable value holder, offering an alternative to the more volatile cryptocurrencies. Remolona shared insights into opting for a wholesale CBDC model, which will not utilize blockchain technology, diverging from the path taken by some other central banks.
Remolona pointed out that previous attempts by central banks to employ blockchain technology for this purpose were not successful. The wholesale CBDC model will position banks as the exclusive participants, with retail banking operations to build upon this foundation. This approach is expected to enhance the efficiency and safety of both domestic and international payment systems, offering banks a reliable mechanism for real-time interbank settlements.
The BSP’s decision to focus on wholesale CBDC, according to Remolona, stems from its potential to offer a risk-free banking option and to support real-time payment systems. However, he acknowledged the challenges associated with retail CBDC, including the risks of disintermediation and the potential to amplify the central bank’s influence in financial markets.
The initiative to develop a wholesale CBDC is confirmed to be achievable within Remolona’s tenure, with a two-year timeline for its implementation. The BSP is looking to replicate successful models from other central banks that have ventured into similar projects.
Remolona highlighted the advancements in CBDC projects globally, including Sweden’s e-krona and China’s digital yuan, which is primarily focused on retail payments.
The technological backbone for the Philippine CBDC will be the Philippine Payment and Settlement System, an infrastructure managed by the BSP itself, bypassing the need for blockchain technology. This move is supported by findings from the Bank for International Settlements (BIS), which suggest that wholesale CBDC could enhance security against fraud and cyberattacks through more reliable digital record-keeping.
Globally, the exploration of CBDCs continues to gain momentum. For instance, the Reserve Bank of India (RBI) is actively working to broaden the scope of its digital rupee by incorporating offline functionalities. This development aims to extend digital currency access to regions with limited internet service, ensuring broader financial inclusion. RBI Governor Shaktikanta Das emphasized the gradual introduction of these capabilities, aiming to cover a wide range of environments through pilot programs.