The Bangko Sentral ng Pilipinas (BSP) has disclosed its decision to rule out the integration of blockchain technology in the anticipated wholesale Central Bank Digital Currency (CBDC) launch, expected to materialise by 2026. This announcement comes as central bank Governor Eli Remolona Jr elucidated the institution’s stance on CBDCs during an interaction with journalists.
Remolona affirmed the Philippines’ inclination towards issuing a wholesale CBDC within the upcoming two years. However, diverging from prevalent trends, the BSP does not intend to leverage blockchain or digital ledger technology, distinguishing its approach from numerous virtual asset infrastructures.
“The decision to abstain from blockchain integration stems from observations where other central banks have faced challenges with the technology,” Remolona remarked, as reported by the Inquirer on Monday.
CBDCs, essentially digital tokens sanctioned by central banks, typically manifest in two variants: retail and wholesale. While retail CBDCs cater to the general populace, wholesale counterparts are exclusively earmarked for institutional usage. BSP initiated an exploratory study on CBDCs back in 2020, aligning with global deliberations on the digital currency landscape.
Acknowledging the intricacies involved, BSP acknowledges the potential ramifications of introducing a retail CBDC, particularly accentuating concerns regarding financial stability amidst potential bank runs. Conversely, a wholesale CBDC is anticipated to streamline domestic and international payment operations, enhancing efficacy and security.
“The decision is to limit it to wholesale. No retail,” asserted Remolona, elucidating BSP’s strategic directive towards CBDC implementation.
The Bank for International Settlements (BIS), a pivotal entity facilitating coordination among central banks worldwide, cautioned in November about the unpreparedness of institutions to address the risks associated with CBDCs.
BSP’s measured approach signifies a meticulous evaluation of the risks and benefits entailed in the CBDC landscape. As the institution steers towards a wholesale CBDC rollout sans blockchain integration, it underscores a prudent strategy to navigate the evolving digital financial ecosystem while prioritizing stability and efficiency.
