The Philippines has asked the IMF to help with staff training for its wholesale central bank digital currency (CBDC) sandbox and to provide advice. In late November 2021, Bangko Sentral ng Pialipinas (BSP) said it was considering a wholesale CBDC, which was confirmed in May, but few details about the CBDCph Project were shared. Now the IMF has added more color as part of a country report on the Philippines.

A retail CBDC was seen as having limited appeal because retail payments are already primarily digital in the Philippines and there have been financial inclusion reforms.

Rather, there are several motivations for moving forward with a wholesale CBDC, starting with addressing cross-border payment frictions. With a large diaspora working abroad, the Philippines is one of the top five recipients of incoming remittances in 2021, according to the World Bank. So lowering the cost of using the agent banking network and speeding up payments is a potential vote winner.

The IMF pointed to lessons that can be learned from multi-CBDC research projects, including the Dunbar Project and the MBridge project, which use a shared platform. Part of the work in the trials explored addressing different regulations in jurisdictions. To start, the IMF suggested that the Philippines might want to try a cross-border CBDC with just one other jurisdiction rather than a multi-country solution.

Another motivation for a CBDC is that the stock market uses money from commercial banks for settlement with the resulting counterparty risk. Additionally, there are challenges with the current automated intraday liquidity facility that the central bank provides to commercial banks, and a CBDC may be one route to address this.

However, the IMF also outlined several potential challenges. For example, with regard to anti-money laundering (AML), the country is listed by the FATF for enhanced monitoring due to deficiencies. Therefore, AML would need to be strengthened to implement a CBDC. The central bank has also recognized the risk of the central bank playing a larger role in reducing interbank activity, which could detract from the progress of the capital market in the country.

As reported earlier this year, the Philippines is also working with Soramitsu, which has helped Cambodia implement a blockchain-based payment network that is used for retail and wholesale payments.