Eli Remolona Jr., the Governor of the Central Bank of the Philippines, has announced plans to introduce a central bank digital currency (CBDC) within the next two years. This forthcoming CBDC will cater primarily to the wholesale market, including banks and financial institutions, and will operate without blockchain technology, utilizing instead the Philippine Payment and Settlement System (PhilPaSS), which is managed by the central bank itself.
The decision to focus on a wholesale CBDC, as opposed to a retail version, is aimed at maintaining the pivotal role of banks within the financial ecosystem. Remolona Jr. pointed out the potential risks associated with a retail CBDC, such as the possibility of disrupting the financial stability of the Philippines through disintermediation, precipitating bank runs, and inadvertently expanding the central bank’s influence.
“There are others that have done it, which we can replicate. It’s what the central banks will use to rival cryptocurrencies,” Remolona Jr. remarked, highlighting the initiative as a response to the growing presence of cryptocurrencies. He also noted that, while other central banks have experimented with blockchain for their CBDCs, these efforts were not successful, leading the Philippines to opt for a different technological foundation.
The governor drew inspiration from international precedents, such as Sweden’s e-krona and China’s digital yuan, suggesting that the Philippines’ CBDC could follow in the footsteps of these already advanced projects. By learning from these examples, the Philippines aims to implement a CBDC that enhances the efficiency and security of financial transactions for wholesale market participants.