Edna Villa

Philippines: Bangko Sentral ng Pilipinas pushing through with CBDC experiment

CBDC PH, a pilot project by the Bangko Sentral ng Pilipinas (BSP), seeks to study and experiment with the usefulness of CBDCs on large-value financial transactions. According to BSP Assistant Governor Edna Villa, the current legal structure in the Philippines does not allow for a retail CBDC player. 

“The BSP charter does not allow us to open accounts directly for individuals which would be needed if you have a retail CBDC,” she tells CoinGeek. “You have to have a charter change to be able to do that,” she adds.

The regulatory bank’s main priority is to launch a pilot case study focused on wholesale CBDC within the year. A management team has been put together to take on the initiative, with Deputy Governor Mamerto Tangonan as project lead. Several advisors are also in place to manage the various sectors, including Edna Villa as the payments advisor and Lilia Guillermo as the technology advisor, amongst others. 

Villa was keen to point out that there has been a positive response coming from government banks and large commercial banks in joining the pilot project. “There is excitement to participate because the technology is fairly new, at least in the Philippines and amongst the banks,” she says.

For the most part, BSP’s main objective is to understand the technology. As Villa states, “this is really knowledge building for ourselves as regulators and for the key financial market participants like the banks, the non-banks, e-money issuers, including the government.”

If their studies show that there are efficiency and security gains to be had from wholesale CBDC, BSP will start to carry out use cases for intraday liquidity for improving security settlement, followed by cross-border. Villa expects to have some transactions in the test and learning environment by this year, after which a report will be released in the first or second quarter of next year.

For her part, a wholesale CBDC would allow Filipinos to experience faster payment transactions due to the infrastructure brought about by CBDC. As she explains, “if your large value payment system is strong, secure and robust, that will reflect in the retail payment system.” 

The two strategic objectives of the BSP are as follows: 50% digitalization of financial transactions by 2023, as well as 70% of Filipino adults obtaining financial transaction accounts. 

Villa appeals to the government and the private sector to assist in their efforts to educate the general public on financial literacy, saying “we cannot do this alone…this is coordinated society approach.” 

Villa admits that onboarding people to digital payments continues to be a challenge. The large transaction fees and concerns about the security of the technology appear to be the largest roadblocks. 

“We want to be able to address cost for those that are lower and high turnover, we want to be able to reduce the cost of that,” she notes. “We are ramping up our financial literacy and education campaigns, the more that people trust and see not only the efficiency but the safety of digital payments, the more they will want to do digital.”

Furthermore, BSP plans to convert its current payment systems registration process into a licensing process in the near future. In the meantime, Villa reminds the general public to only deal with payment systems that are registered with the BSP. 

As for blockchain technology, Villa says the BSP will wait to hear from their technology provider, which they have yet to hire, on whether they should learn about distributed ledger technology (DLT) and blockchain.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: BSV Global Blockchain Convention panel, CBDCs and BSV Blockchain

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