Philippines to Introduce Non-Blockchain CBDC After Two Years
The Central Bank of the Philippines is set to launch a new type of CBDC project in the upcoming two years. The monetary authority noted that the project is a wholesale CBDC that will allow various banks to conduct and record international transactions.
The governor of the Bangko Sentral ng Pilipinas (BSP), namely Eli Remolona, recently told the media that the central banking firm is working on the latest wholesale CBDC project. Local media outlet, Inquirer published the statement on 12th February.
Remolona told the media the plan of BSP to formulate a new type of CBDC project. On this front, the BSP official retained that the project will not leverage blockchain technology.
He stated that other Central banking firms have tried to incorporate blockchain technology as the core infrastructure of their CBDC projects but it has not gone well. On the contrary, the CBDC project of BSP uses a payment and settlement network that is owned and operated by the banking institution.
In this manner, the new network will issue a wholesale CBDC that various banks will be able to mediate. Meanwhile, BSP has expressed reservations regarding the retail CBDC issuance such as lack of intermediation.
The monetary authority also states the possibility of bank runs instigated via retail CBDCs during periods of financial strain and magnifies the footprint of the central bank.
Limitations of Retail CBDCs
Speaking on the matter of retail and whole CBDCs, Remolona noted that BSP intends to limit CBDCs to the whole sector only. This policy ensures that reliable and regulated banking authorities are the only involved counterparties. In the next phase of development, it is possible for retail CBDCs to leverage the same underlying counterparty transaction network.
He referenced the approach of China and Sweden noting that in those regions, the government is working on CBDCs as digital equivalent of legal tender and a viable alternative against cryptocurrencies. He noted that BSP can emulate the same infrastructure for its wholesale CBDC program.
As per the reigning governor, CBDCs were going to take shape before the end of his tenor as a real possibility. Speaking with the journalists he noted that the project may come to fruition in the next two years. The government of the Philippines has adopted a strict policy towards the crypto sector.
On this account, the nation prevented foreign actors from participating in the local market. The Securities and Exchange Commission of Philippines introduced a comprehensive ban on Binance in December, 2023 citing issues around unregistered trading activities within its jurisdiction.
Circle Partners with Philippines Exchange
Circle has offered a new partnership deal with a local Philippines cryptocurrency exchange called Coins.ph. On this account, around 10 million account holders on Coins.ph will be able to access USDC stablecoin as faster, economic, and more accessible remittance option. Circle officials confirmed the venture with Coins.ph on 10th October.
On this front, both firms are set to work in tandem to raise awareness around USDC payment options and assist local citizens in accessing economic remittance options in comparison to conventional cross-border money channels. As per data from the World Bank, the average cost of making a $200 transfer to Asian countries in 2022 was around 5.7%.
Philippines’ Unbanked Population
However, there is a sizeable population that is still unbanked in the Philippines which has created additional issues around remittance options. The Central Bank of the Philippines reported that around 44% of the people in the country were reportedly unbanked in 2021.
Meanwhile, the nation relies heavily on foreign remittances generating $36.1 billion in remittance income for 2022.
Regardless, the locals continue to face issues such as high transaction fees, complicated processes, delayed transactions, etc. while dealing with conventional remittance networks. In September 2023 the Securities and Exchange Commission of the Philippines partnered with US SEC and Asian Development Bank to crack down against crypto-backed crimes.
The three firms issued a joint press release on 15th September to form IOSCO and arrange training workshops to upskill combat scams and install a fraud prevention toolkit.
