The Bangko Sentral ng Pilipinas (BSP) has unveiled its intention to launch a wholesale central bank digital currency (CBDC) in the near future, as revealed by the Governor, Eli Remolona. The move aims to leverage digital currency technology without adopting blockchain, a departure from strategies employed by other central banks.
BSP’s approach to CBDC implementation
Remolona clarified that the BSP’s CBDC initiative would eschew blockchain technology, citing past failures of other central banks in this regard. Instead, the CBDC will operate within a payment and settlement system owned by the central bank.
The focus will be on a wholesale CBDC, with banks serving as intermediaries. This approach aims to avoid potential pitfalls associated with retail CBDCs, such as disintermediation and heightened financial stress during crises.
The BSP’s decision to limit the CBDC to wholesale transactions ensures that banks remain the sole counterparties. These banks will facilitate retail transactions, mitigating concerns over disintermediation and the expansion of the central bank’s influence.
Remolona highlighted the examples of Sweden and China, which are pursuing similar CBDC strategies to complement traditional cash and counteract the rise of cryptocurrencies.
Implementation timeline and regulatory landscape
Governor Remolona affirmed that the CBDC project would materialize within his term, potentially within the next two years. This development comes amidst the Philippines’ stringent stance on the cryptocurrency industry, with the SEC taking measures to safeguard the local market from foreign players.
In December 2023, the SEC reiterated its ban on Binance, citing unregistered activities within the country.
Despite regulatory warnings, Binance has persisted as a prominent cryptocurrency trading platform in the Philippines. Some users have lauded its local services as reliable and stable on social media platforms. In response to public criticism, SEC Chair Kelvin Lee emphasized the compliance costs evaded by Binance and urged investors to patronize one of the 17 registered virtual asset service providers operating in the country.
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