Efficiency and Scalability: BSP Considers Introducing Wholesale CBDC
The Central Bank of the Philippines (BSP) is considering the introduction of a wholesale central bank digital currency (CBDC) on a wholesale scale next year or in 2026, announced BSP Governor Eli Remolona Jr. He also emphasized that he expects to implement this innovation during his term, which will last until 2029.
Recently, the central bank has been conducting trials of the Hyperledger Fabric blockchain technology as part of a pilot project called Project Agila. However, Governor Remolona has informed that he plans to abandon using blockchain technology for this purpose.
Decision on Wholesale CBDC
The Central Bank of the Philippines has decided to focus on introducing wholesale CBDC instead of retail CBDC. Governor Remolona stated that other central banks that tried to implement blockchain did not succeed. Instead, BSP plans to utilize the technology that underlies the Philippine Payment and Settlement System (PhilPaSSplus), the real-time gross settlement system in the country.
According to reports, the wholesale CBDC will have a separate infrastructure that can be used outside of PhilPaSSplus operating hours.
Scalability Challenge for Retail CBDC
Although blockchain technology may face scalability issues with retail CBDC, it is not the same barrier for wholesale CBDC. Institutional transactions usually have lower volumes, so they do not pose such a challenge for this form of digital currency.
However, central banks have recently started discussing tokenization and smart contracts, not necessarily using blockchain. In the case of using tokenized deposits, a consumer could make a payment to another bank’s customer using tokenized deposits. The issuing bank would make the payment to the receiving bank using tokenized CBDC. However, if this model is implemented without standardization, the requirements for blockchain technology will be higher.
DLT Application in the Context of Wholesale CBDC
In the past, Benoît Cœuré, the former Director of the BIS Innovation Office, noted that blockchain can be widely used in the case of wholesale CBDC because this technology can be a key differentiation factor for this form of central bank digital currency.
Currently, trials are underway for settling securities transactions using DLT technology. There are three different scenarios, of which only one involves the use of blockchain, and it is also the only scenario related to wholesale CBDC.
Philippine CBDC for Cross-Border Interbank Payments
The Philippines also plans to use CBDC for international interbank payments. The country is one of the 23 central bank observers in the international CBDC project called mBridge, which utilizes DLT technology.
The introduction of wholesale CBDC is another step taken by the Philippines towards digitizing its financial system. Other central banks around the world are also considering the introduction of their own digital currencies, which may accelerate the development of a global financial infrastructure based on blockchain technology.