The Philippines and Singapore Implement Wholesale CBDC – What Does It Mean for the Financial Sector?

The Philippines Plan to Launch Wholesale Central Bank Digital Currency Within Two Years

In 2020, the Philippines initiated an exploratory study on the feasibility of Central Bank Digital Currencies (CBDCs), and now the region is aiming to introduce a wholesale CBDC within the next two years. The Bank for International Settlements (BIS) has noted that Filipino financial institutions are not adequately prepared to handle the risks associated with CBDCs.

BSP Governor Announces the Philippines’ Decision on Wholesale CBDC

The Governor of the Bangko Sentral ng Pilipinas (BSP), Eli Remolona Jr., informed the “Inquirer” newspaper that the Philippines will focus on developing a wholesale CBDC, as opposed to a retail one. The launch is slated for approximately two years from now, with the technology of distributed ledger and blockchain notably not being utilized.

Benefits of Wholesale CBDC for Financial Institutions

The BSP believes that wholesale CBDCs can enhance the security and efficiency of domestic and international transactions. Banks will gain an additional channel to deposit funds with the BSP outside of reserves, facilitating real-time interbank payments.

Wholesale CBDCs offer numerous advantages to financial institutions:

  • Eliminate intermediaries.
  • Reduce settlement times.
  • Streamline transaction processes.
  • Lower fees in international payments, securities transactions, and currency exchanges.
  • Enhance banks’ security through a more secure form of digital currency.

Singapore’s Plans Regarding Wholesale CBDC

Not only the Philippines are reaping the benefits of wholesale CBDCs. Singapore intends to launch its wholesale CBDC as early as this year. During the Singapore Fintech Festival in November, Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS), announced collaboration with local banks to kick off a pilot use of wholesale CBDCs.

In 2016, Singapore conducted initial tests of wholesale CBDCs mainly operating on distributed ledgers, facilitating real-time interbank settlements and payments with central banks. Project Ubin was the first experimental project focused on exploring blockchain technology and digital registries.