In the fourth quarter of 2022, the Bangko Sentral ng Pilipinas (BSP) plans to start a wholesale central bank digital currency (CBDC) experiment for large-value financial transactions, facilitating fund transfers between banks and nonbank financial firms.
“The pilot project covers the experimentation of the CBDC’s use to transfer large-value financial transactions on a 24 [hours] by 7 [days] basis, across a limited number of financial institutions but possibly covering both banks and non-bank institutions,” BSP Governor Benjamin E. Diokno said in a speech.
CBDC is a digital representation of fiat currency issued by a central bank. It is intended to be worth the same as a country’s paper currency and is backed by government guarantees. In addition to creating money, central banks can issue CBDCs as a digital equivalent of a country’s fiat currency.
An intersectoral project management team leads project CBDCPh to ensure coverage of critical operational areas. Among them are policy and regulatory considerations, technology infrastructure, governance, organizational requirements, legal issues, payment and settlement methods, reconciliation procedures, and risk management.
According to the BSP, a wholesale CBDC might help to alleviate frictions associated with significant cross-border foreign currency transfers, settlement risk exposure from utilizing commercial bank money in stocks, and maintaining an intraday liquidity facility.
The BSP is investigating the potential use of wholesale CBDCs in regions where they can provide the most value-added benefits to the payment system. The country’s mother bank also noted that
CBDCs could alleviate pain points in significant cross-border transactions and foreign currency transfers.
“We believe that we need to address this issue by reducing transaction costs, shortening processing times, and enhancing the transparency of such transfers,” Diokno said.
“Second is the settlement risk exposure arising from commercial bank money in our equities market. We intend to mitigate this risk with CBDC, central bank money,” he added.
Embracing blockchain?
The experiment indicates a rising acceptance of blockchain technology in banking, which could lead to establishing a CBDC soon. It uses blockchain technology to create and track cryptocurrencies like Bitcoin and Ethereum.
The primary distinction is that, unlike uncontrolled cryptocurrencies with no central issuing authority, a CBDC is issued and regulated by a country’s monetary authority or central bank. While the value of cryptocurrencies fluctuates drastically, the value of a CBDC is fixed to a country’s currency, and it is essentially the digital equivalent of the Philippine Peso.
Tetrix is a Filipino-developed [JPLT1] integrated ecosystem that connects several blockchains to bridge the gap between all blockchain projects. The company has also recently released Pitaka, a crypto wallet that allows users to store, manage, and exchange several cryptocurrencies and digital assets using a single browser extension.
Businesses and developers can use the omnichannel interoperability protocol to create inter-chain applications without middleware. Tetrix-based applications make crypto more accessible to end consumers, speeding up the exponential adoption of digital assets.
Tetrix is led by CEO and co-founder Emman Navalan and is made up of a varied group of Filipinos who have made significant achievements in their respective disciplines and are respected by critical stakeholders in the blockchain ecosystem.