Philippines Central Bank to Introduce Wholesale CBDC in the Next Two Years

Governor Remolona of the Central Bank of the Philippines has announced plans to launch a non-blockchain-based Central Bank Digital Currency (CBDC) in the near future.

Philippines central bank plans to launch a non-blockchain digital currency (CBDC) through banks in the next two years.

By Hassan Shittu | February 12, 2024 | 3 min read

Governor Eli Remolona of the Philippines Central Bank (BSP) recently unveiled the central bank’s plans to launch a wholesale central bank digital currency (CBDC) in the coming years. This move aims to leverage digital payment technologies to improve financial services for unbanked populations and micro, small, and medium enterprises (MSMEs).

Wholesale CBDC: No Blockchain, Just Banks

In an interview with local newspaper Inquirer.net, Remolona emphasized that the BSP’s CBDC strategy will not involve blockchain technology, stating that “Other central banks have tried blockchain, but it didn’t go well.” Instead, the CBDC will operate on a payment and settlement system owned by the central bank. The BSP plans to focus on a wholesale approach, where the CBDC will be mediated by banks.

Remolona cited concerns about potential issues associated with retail CBDCs, such as disintermediation, bank runs during financial stress, and the expansion of the central bank’s footprint. Consequently, the decision was made to limit the CBDC to wholesale transactions, with banks acting as the only counterparties.

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The governor referred to the experiences of countries like Sweden and China, which are developing CBDCs as digital alternatives to cash and cryptocurrencies. Remolona expressed confidence that the Philippines can replicate their success. He assured that the CBDC would be implemented during his term as governor, potentially within the next two years.

Digital Payments Transformation Roadmap Leads to Progress

BSP Deputy Governor Mamerto Tangonan attributed the significant progress in digital payments to the implementation of the BSP’s 2020–2023 Digital Payments Transformation Roadmap (DPTR), supported by both public and private sector partners. Tangonan highlighted the exponential expansion of digital retail payments transactions, which increased from a mere one percent share in 2013 to a 42.1 percent share by 2022. He expressed confidence that the country would achieve its 50-percent target by the end of 2023.

Digitalization Flourishing in the Philippine Financial System

The BSP and the Philippines’ Department of the Interior and Local Government (DILG) launched Paleng-QR Ph Plus in 2022, a program aimed at promoting digital payments in public markets, transport hubs, and various businesses using QR Ph technology. This initiative aligns with the BSP’s objective of transitioning half of the country’s total retail payments volume into digital form and integrating 70% of Filipino adults into the formal financial system.

Deputy Governor Bernadette Romulo-Puyat of the Central Bank of the Philippines emphasized the additional benefits of digital payments, stating that they enable users to monitor their finances, reduce unnecessary spending, and manage their budgets effectively. These accounts also provide access to other financial tools such as insurance, investments, and savings.

Apart from Paleng-QR Ph Plus, the BSP has launched other digital payment initiatives, such as Bills Pay Ph, which streamlines the country’s fragmented bill payment system. The BSP is currently mapping out the next phase of the country’s digital journey under the 2024–2026 Digital Payments Transformation Roadmap.

📚 Reference Links

• 1. Philippines Central Bank Eyes Bank-Mediated Non-Blockchain CBDC in Next Two Years
• 2. BSP Digital Payments Transformation Roadmap
• 3. The Future of Digital Payments in the Philippines
• 4. Paleng-QR Ph Plus Program
• 5. Bills Pay Ph Initiative

Q&A: Addressing Additional Reader Concerns

Q: Why did the Philippines Central Bank opt for a wholesale CBDC instead of a retail one? A: The central bank has concerns about potential issues associated with retail CBDCs, such as disintermediation, bank runs, and an expanded role for the central bank. By limiting the CBDC to wholesale transactions, with banks acting as intermediaries, these issues can be avoided.

Q: How does the Philippines’ digital payments adoption compare to other countries? A: The Philippines has made significant progress in digital payments adoption, with digital retail payments transactions increasing from one percent in 2013 to 42.1 percent in 2022. The BSP aims to further accelerate this shift and achieve a 50-percent target by the end of 2023.

Q: What benefits do digital payments offer in the Philippines? A: Digital payments provide secure, convenient, and efficient ways for both merchants and customers to make and receive payments. They also enable users to monitor their finances, reduce unnecessary spending, and access additional financial tools such as insurance, investments, and savings accounts.

Future Outlook: Roadmap for Digital Payments Transformation

The Philippines’ commitment to digital payments, as exemplified by the continuous development of its Digital Payments Transformation Roadmap, demonstrates its determination to modernize its financial system. With the upcoming introduction of a wholesale CBDC, the country is poised to further enhance its digital ecosystem.

By leveraging digital technologies and partnering with both public and private sector stakeholders, the BSP aims to increase financial inclusion, boost the share of digital retail payments, and integrate more Filipino adults into the formal financial system.

The future of digital payments in the Philippines looks bright, with advancements in QR technology, streamlined bill payment systems, and the continuous expansion of financial services. As the country embraces digitalization, it positions itself for a more inclusive and accessible financial landscape.

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Disclaimer: The information provided in this article is for educational purposes only and does not constitute financial advice. Readers should conduct their own research and consult with a professional before making any investment decisions.

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