The Bangko Sentral ng Pilipinas (BSP) is taking a significant step forward in the digital currency space by announcing its plans to introduce a Central Bank Digital Currency (CBDC) that operates without the use of blockchain technology.
Under the leadership of BSP Governor Eli Remolona, the Philippines is poised to launch this innovative wholesale CBDC model within the next two years, marking a departure from the blockchain-based approaches seen in other global CBDC projects.
Philippines’ Bold Move towards a Non-Blockchain CBDC
This initiative aligns with the global trend of exploring digital currencies as a secure and stable means of payment, offering an alternative to the more volatile cryptocurrency market.
Governor Remolona elaborated on the decision to adopt a wholesale CBDC model that excludes blockchain technology, citing inefficiencies in previous blockchain attempts by central banks.
The model will exclusively involve banks, laying the groundwork for retail banking advancements and aiming to bolster both domestic and international payment systems.
Wholesale CBDC: A Risk-Free Banking Option
The BSP’s focus on a wholesale approach to CBDC stems from its potential to provide a risk-free banking option and facilitate real-time payment systems.
However, challenges related to retail CBDC, such as the risks of disintermediation and potential market dominance by the central bank, were acknowledged by Remolona.
Global CBDC Trends and the Philippine Approach
As the BSP sets a two-year timeline for the CBDC’s implementation, it aims to draw on the successes of other central banks that have embarked on similar ventures.
Remolona highlighted global CBDC advancements, such as Sweden’s e-krona and China’s digital yuan, which primarily targets retail payments.
The technological foundation for the Philippine CBDC will be the Philippine Payment and Settlement System (PhilPaSS), an infrastructure managed by the BSP, thus eliminating the need for blockchain technology.
This strategy is reinforced by insights from the Bank for International Settlements (BIS), which suggests that a wholesale CBDC could bolster security against fraud and cyberattacks through enhanced digital record-keeping.
CBDC Development Beyond the Philippines
The exploration and development of CBDCs are accelerating worldwide.
The Reserve Bank of India (RBI), for example, is expanding the capabilities of its digital rupee to include offline functionalities, aiming to improve financial inclusion in areas with limited internet access.
RBI Governor Shaktikanta Das emphasized a gradual rollout of these features, intending to accommodate a variety of environments through pilot programs.
