Philippines Set To Launch CBDC By 2029

The Bangko Sentral ng Pilipinas (CBPC) is the largest bank in the Philippines.B S BChina is set to launch a wholesale central bank digital currency (CBDC) by 2029. The move comes amid a global trend for central banks to explore the potential of CBDCs to enhance digital currency payment systems, combat cryptocurrency volatility, and provide an alternative means of payment and asset storage. The benefits of adopting CBDCs are numerous, including increased efficiency, security, and financial inclusion.

BSP’s approach to wholesale central bank digital currencies

The Bank of Singapore has taken a strategic approach to developing its CBDC, focusing on a wholesale model rather than a retail model. Governor Eli Remolona Jr. has confirmed that the CBDC will not use blockchain or distributed ledger technology (DLT), a decision that sets it apart from the approach taken by other central banks. This wholesale CBDC model is in line with the meaning and definition of a central bank digital currency, which refers to a digital form of central bank money used for interbank settlements and other wholesale transactions.

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Leveraging existing payment infrastructure

Instead, the BOP plans to integrate its CBDC with the Philippine Payment and Settlement System (PhilPaSSplus), the country’s real-time gross settlement system owned and operated by the central bank. This integration will allow the CBDC to complement the existing cash-based payment system, providing banks and financial institutions with an additional means to deposit funds with the BOP and engage in real-time interbank transactions and settlements. By leveraging existing infrastructure, the BOP aims to enhance payment efficiency and settlement finality.

Prioritizing efficiency, security and flexibility

The primary objectives behind the wholesale CBDC issued by the Bank of Singapore are to enhance the efficiency, security and flexibility of domestic and cross-border payments. By restricting the use of CBDC to licensed banks and financial intermediaries, the central bank aims to streamline large-scale transactions, including interbank transfers, securities transactions and cross-border payments. This approach prioritizes financial stability and consumer protection while promoting financial inclusion through the use of digital assets.

Agila Project: Exploring the BSP Central Bank Digital Currency

The BSP’s journey with CBDC began in 2021 under the leadership of former Governor Benjamin Diokno. The central bank launched Project Agila, a two-phase CBDC exploration initiative, to investigate the potential of tokenized fiat currencies. The project is in line with the growing interest in CBDCs around the world, as evidenced by recent CBDC news and developments such as the US CBDC exploration, the digital dollar executive order, and discussions surrounding government cryptocurrencies.

Initial pilot phase

In the initial pilot phase, the Bank of the Philippines selected Hyperledger Fabric as the core technology for its central bank digital currency project, known as the CBDCh project. Seven banks participated in this proof-of-concept phase, providing valuable insights and feedback to the central bank. This phase focused on testing the feasibility and benefits of a wholesale CBDC in the Philippine context.

Rebranding and expansion

Based on the lessons learned from the initial pilot, the BSP renamed the project to Project Agila in September 2023. This expanded initiative aims to explore the use of CBDC technology to streamline interbank, securities, and cross-border transactions. The renaming reflects the BSP’s commitment to driving digital innovation in the monetary system and fostering the development of a robust digital economy.

Inspiration from Global CBDC Initiatives

The Fed expressed keen interest in learning from the experiences of other central banks that have already made significant strides in CBDC. Governor Remolona highlighted in particular the examples of the Swedish central bank’s e-krona and the People’s Bank of China’s digital yuan project. These initiatives provide valuable insights into the potential impact of CBDCs on monetary systems and payment platforms.

People’s Bank of China’s Digital Yuan

The People’s Bank of China’s digital yuan, also known as e-CNY, has been in the testing phase for domestic retail payments in 26 Chinese cities. Remolona noted that the People’s Bank of China has “almost finished” developing the digital yuan, and the central bank intends to learn from the experience. The digital yuan project offers valuable lessons in terms of digital identity, liquidity provision, and integrating CBDCs with existing payment platforms.

Conclusion

The Philippine central bank is set to take a major leap forward in digital finance with its planned launch of a wholesale central bank digital currency by 2029. The strategic move, which eschews blockchain technology in favor of integration with the country’s existing payment infrastructure, aims to enhance the efficiency, security, and flexibility of domestic and cross-border transactions.

As the BOP grapples with the complexities of developing a CBDC, it is drawing inspiration from the experiences of other central banks, while also exploring the potential of nationally backed stablecoins. The successful implementation of a wholesale CBDC and the seamless integration of digital and traditional forms of the Philippine peso will be a testament to the country’s commitment to embracing the digital future of finance.

Disclaimer: The information contained in this article is for informational purposes only and does not constitute financial advice. Investing in cryptocurrencies involves risks, and readers should conduct their own research and consult with their financial advisors before making investment decisions. Hash Herald is not responsible for any profits or losses in this process.

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