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How is money transforming in today’s rapidly evolving digital economy? The very nature of money is undergoing a historic evolution. Central bank digital currencies, once an abstract concept debated in policy discussions and tech think tanks, are now emerging as a tangible, powerful force reshaping financial ecosystems worldwide. CBDCs are not just a “digital version of cash.”
They represent a fundamental rethinking of how value moves, how economies function and how financial inclusion can scale like never before. With over 90 percent of the world’s central banks exploring or piloting their own digital currencies, including pioneers such as the Bahamas with the Sand Dollar, Nigeria with the eNaira, Sweden with the e-krona and China with the digital yuan, the world is heading toward a CBDC-centered future.
The Philippines and Southeast Asia must not just watch these advancements from the sidelines. We cannot afford to let this opportunity pass us by. The time to lead is now.
CBDC should be the center of our digital finance roadmap. At its core, a CBDC is a sovereign currency in digital form, issued and regulated by a country’s central bank.
Unlike cryptocurrencies such as Bitcoin or Ethereum, CBDCs are legal tender, backed by the government, and designed to serve as a medium of exchange, unit of account and store of value. There are two main types of CBDCs, retail CBDCs, which are intended for everyday consumer and business use and wholesale CBDCs, which focus on large-value interbank and institutional transactions. While cryptocurrencies and e-wallets have made impressive strides, CBDCs combine the innovative efficiency of digital assets with the stability and regulatory oversight of central banking.
This is a more balanced, reliable and equal approach, fully backed by the government. CBDCs aim to improve payment efficiency and boost financial inclusion, thus providing a resilient alternative to existing payment systems.
The Bangko Sentral ng Pilipinas (BSP) has been proactive in exploring the potential of CBDCs. In December 2024, the BSP completed the Project Agila, a proof-of-concept for a wholesale CBDC aimed at facilitating large-value interbank payments.
This project involved six major financial institutions and focused on performing 24/7 interbank transfers, even beyond regular banking hours and on holidays. These transactions can safely be supported by open-source distributed ledger technology through the Oracle Cloud Infrastructure, due to its ability to record, synchronize and share data across a network of participants.
This makes it ideal for off-hours inter-institutional fund transfers, or when the PhilPaSSplus system is offline.
The BSP is crafting a comprehensive roadmap in 2025 to guide the potential rollout of a wholesale CBDC within the next three to five years. While the BSP remains cautious about retail CBDCs, citing the effectiveness of existing digital payment systems, the successful implementation of a wholesale CBDC could lay the groundwork for broader adoption in the future. The pilot demonstrated key benefits, including faster settlement speeds, reduced reliance on clearing intermediaries and greater transaction transparency.
However, the pilot also surfaced important challenges, such as the need to integrate CBDC systems with legacy banking infrastructure, which often lacks built-in interoperability. The country’s technological infrastructure must first be bolstered. It must be reliable, secure and safe enough to successfully implement CBDCs.
In addition, broad adoption will require extensive user education and strategic change management to avoid fragmentation and ensure alignment across financial institutions. We also need to address the regulatory framework, developing comprehensive regulations that address data privacy, cybersecurity and anti-money laundering. This is essential to maintain public trust.
Educating the public about the benefits and usage of CBDCs is vital to encourage adoption and prevent misconceptions. And lastly, clear coordination with financial institutions collaborating with banks and other financial entities to integrate CBDCs into existing systems will be vital to a seamless transition.
In the Philippine context, where millions remain underbanked or financially excluded, CBDCs could serve as a safe, universally accepted digital wallet issued by the state. It opens the door for those without access to traditional banking services to join the formal economy securely, instantly and at zero or minimal cost.
We foresee reduced transaction costs for the poor, especially in remote areas; faster, direct disbursement of government subsidies and social welfare; improved security compared to holding physical cash; and offline capabilities for rural and unconnected regions.
More importantly, by anchoring the CBDC to the identity and credit profile of a person, it could help create a formal financial footprint for millions, allowing them access to loans, insurance and investments they currently can’t tap into. Imagine a sari-sari store owner receiving government aid or supplier payments in digital pesos instantly, without needing to queue at a remittance center.
This is not just theory. It’s achievable. We align with the BSP’s strategic game plan, which starts with soliciting feedback from stakeholders on the feasibility and benefits for targeted end-users, and then assessing the potential impact of proposed CBDC use cases on monetary policy, financial stability, digital payments, AML/CFT measures and the legal framework.
Next, we collaborate with relevant technology providers to develop use case prototypes for specific payment streams, obtain technical assistance from expert organizations such as the International Monetary Fund (IMF) to support capacity building, and then establish partnerships with other central banks engaged in similar research or pilot projects.
CBDCs have the potential to revolutionize payment processing, offering faster, more efficient transactions compared to traditional clearing methods.
By streamlining payment flows, they can reduce transaction costs, improve liquidity and deliver tangible benefits to both consumers and businesses, especially micro, small and medium enterprises (MSMEs).
We envision a future where programmable, secure and real-time digital money is not just an innovation but the new standard. CBDCs are not a far-off future. They are an active global movement. We urge our banks and financial institutions to be active, assertive and aggressive in adopting and preparing for CBDC integration. The private sector must lean in, not step back.
Lito Villanueva is the Philippines’ leading and award-winning thought leader in inclusive digital finance. As EVP and Chief Innovation and Inclusion Officer at RCBC, he has led several digital initiatives at scale. He is also the founding chairman of Fintech Alliance PH, overseeing 95 percent of the nation’s digital retail financial transactions. He is the first global chairman of the South Africa-based Alliance of Digital Finance Associations, a co-founder of the Asia FinTech Alliance, and a permanent council member of the Asia FinTech Forum. He has substantially impacted the fintech landscape in the Philippines through his leadership and innovative efforts. His contributions have been crucial in advancing the fintech ecosystem in the Philippines, making financial services more inclusive and efficient.
