Retail CBDC
In 2020, the Bangko Sentral ng Pilipinas (BSP) undertook an exploratory analysis to assess the various issues associated with the issuance of a Central Bank Digital Currency (CBDC). This study drew from existing literature and insights from other central banks. It encompassed several aspects, including the potential impact on the fundamental elements of central banking in the Philippines, the legal considerations, and the potential for CBDCs to promote financial inclusion. One of the driving factors for the BSP’s interest in exploring CBDC issuance was to enhance the security and efficiency of the national payment system.
Moving to 2021, the BSP identified the specific scenarios in which CBDC issuance could be beneficial for the Philippines. This involved comparing the operational features of the country’s current retail and high-value payment systems with the potential applications of CBDCs. Following this assessment, the BSP concluded that, considering the strides made in the widespread adoption of digital payments and financial inclusion reforms, the introduction of a retail CBDC in the Philippines would offer limited immediate advantages.
WholeSale CBDC
On the other hand, the BSP recognized the value of a wholesale CBDC to address specific challenges within the national payment system. This pertained to various areas:
- Mitigating difficulties in cross-border foreign currency transfers by reducing transaction costs, expediting processing times, and enhancing transparency.
- Managing settlement risk exposure, particularly related to the use of commercial bank money in the equities market.
- Facilitating the operation of an Intraday Liquidity Facility (ILF), playing a crucial role in the settlement of ILF and subsequent fund collection.
The primary objectives of the pilot program for the wholesale CBDC project, known as CBDCPh, are centered around building the necessary organizational capabilities and practical understanding of key CBDC aspects, specifically focusing on addressing challenges within the national payment system. The pilot initiative involves experimenting with the utilization of CBDCs for 24×7 large-value financial transactions. This experimentation is limited to a select number of financial institutions, potentially encompassing both traditional banks and non-bank entities.
Sources:
https://www.bsp.gov.ph/Media_And_Research/Publications/CBDC_for_the_BSP_Book.pdf