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Manila Bulletin devider Business devider BSP mulls retail digital currency

BSP mulls retail digital currency

Published Nov 18, 2022 04:49 pm

The Bangko Sentral ng Pilipinas (BSP) is focusing more on the research and development of a wholesale central bank digital currency (CBDC) but it is also exploring possible uses for a retail CBDC.

BSP Governor Felipe M. Medalla told CNBC Asia TV on Friday, Nov. 18, that retail CBDC may be useful when it comes to streamlining the costs of cash transfers or remittances. Cash remittances sent by overseas Filipinos is one of the major US dollar sources for the country.

BSP building and logo/Reuters

“We think that a central bank digital currency at the retail level is not needed but we (also) think, especially for making cross-border transfers and remittances cheaper, it may play role,” Medalla said.

However, all other factors considered and based on the current setup of the Philippine digital payment system, a wholesale CBDC is still preferable. “(We’re) moving towards a central bank digital currency at the wholesale level so even if the banks are not open, transfers and trade can happen,” he said.

It is only on the possibility of bringing down the cost of remittances that the BSP is open to exploring the retail side of a BSP-managed digital currency.

“Digital currencies could be used to make remittance cheaper, whether that’s done by a private crypto or by a central bank-managed digital currencies, we’re open to both scenarios. The important point to us is that remittances, since many of our workers are working abroad, is how to make remittances cheaper, faster and safer,” said Medalla.

In a report, the BSP said financial transactions with banks using a wholesale CBDC appear readily feasible while retail CBDCs would need a law or legislation. Retail CBDCs involve BSP directly distributing CBDC to the public.

The BSP is currently conducting its Project CBDCPh which studies the potential risks and use in large-value 24x7 payment transactions of CBDCs for both banks and non-banks.

The pilot project is a major step for both the BSP and the domestic financial sector to understand a wholesale CBDCs. The BSP has announced previously that it will use wholesale CBDC over retail CBDC because the former will have a more significant contribution in addressing frictions on large cross-border foreign currency transfers, settlement risk exposure from using commercial bank money in equities, and operating an intraday liquidity facility.

Basically a wholesale CBDC will reduce transaction costs, shorten processing times, and enhance the transparency of such transfers.

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