The Bangko Sentral ng Pilipinas (BSP) has set the financial world abuzz by announcing plans to launch a central bank digital currency (CBDC) that shuns the popular blockchain technology. Here’s an in-depth look at what the BSP Governor Eli Remolona has in store for the future of digital currency in the Philippines.

A Bold Departure from Blockchain

The BSP’s revelation of their upcoming non-blockchain CBDC has marked a significant divergence from global CBDC trends. Governor Remolona has elucidated that this unique approach is aimed at establishing a secure and stable payment system as an alternative to the volatile cryptocurrency market. By choosing a wholesale CBDC model, the central bank is placing its bets on a system that excludes blockchain, a choice not many other central banks have made.

Why Not Blockchain?

According to Governor Remolona, blockchain technology has so far not met the central banking standards for efficiency and security in previous implementations. The proposed wholesale CBDC model will thus involve only banks, creating a solid base for retail banking to build upon. This model is poised to enhance the efficiency and safety of the country’s payment systems, both domestically and internationally, by providing a reliable real-time interbank settlement mechanism.

The Wholesale CBDC Vision

Remolona’s vision for the wholesale CBDC is a risk-free banking option that bolsters real-time payment systems. However, he also recognizes the challenges that a retail CBDC would pose, such as the risk of disintermediation and an increased influence of the central bank in financial markets. The BSP’s commitment to this initiative is evident in their two-year timeline for its implementation, within the Governor’s tenure.

Global CBDC Landscape

The BSP’s initiative is set against a backdrop of global advancements in CBDC projects. Notably, Sweden’s e-krona and China’s digital yuan, which is primarily focused on retail payments, are shaping the international digital currency scene. The Philippines aims to emulate these success stories, albeit with a different technological approach.

The Technological Backbone

For the Philippine CBDC, the BSP will utilize the Philippine Payment and Settlement System (PhilPaSS), an existing infrastructure managed by the central bank, thus circumventing the need for blockchain. This decision garners support from the Bank for International Settlements (BIS), which advocates for the security enhancements that a wholesale CBDC could bring against fraud and cyberattacks.

Expanding Horizons: RBI’s Digital Rupee

While the BSP forges its path, the Reserve Bank of India (RBI) is also expanding its digital rupee’s functionalities to include offline transactions. This move is aimed at fostering financial inclusion by reaching out to regions with sporadic internet connectivity. RBI Governor Shaktikanta Das has highlighted the importance of a gradual rollout through pilot programs to accommodate diverse environments.

Looking Ahead

The BSP’s pursuit of a non-blockchain CBDC is a testament to the dynamic nature of digital currency innovation. As the Philippines embarks on this trailblazing journey, the world watches with keen interest to see how this unconventional path will unfold in the realm of global finance.