The Bangko Sentral ng Pilipinas (BSP) is moving to the next stage of launching its own central bank digital currency (CBDC) after completing the testing phase for its proof-of-concept, Project Agila.
Project Agila is the BSP’s CBDC project, familiarizing both the BSP and participating financial institutions with CBDC technology solutions.
BSP Governor Eli M. Remolona Jr. said Thursday, Dec. 5, that insights gained from Project Agila will guide the CBDC roadmap.
“Our goal is to leverage new technologies to further enhance the efficiency and resilience of the national payment system,” he said.
The BSP plans to adopt wholesale CBDCs, which are digital money and direct liabilities of the central bank. Banks and other financial institutions can use wholesale CBDCs for interbank payments, securities transactions, and cross-border payments.
“Wholesale CBDCs are expected to enhance liquidity management, reduce settlement risks, and support financial stability,” said Remolona.
The BSP announced the completion of the proof-of-concept on Thursday. It said this will now allow financial institutions to transfer funds during off-business hours, including evenings, weekends, and holidays.
“These transactions can be securely supported by open-source distributed ledger technology through the Oracle Cloud Infrastructure,” said the BSP. The project involved evaluating functional, performance, security, exploratory, end-to-end, and programmability testing.
With the finalization of the testing phase, the BSP is on track to launch the CBDC within Remolona’s six-year term, or by 2028.
Remolona said earlier that by the end of Project Agila, both the banks and the BSP that participated in the project are expected to have a clearer understanding of CBDC technology and wholesale CBDCs.
In testing these technologies, the BSP was able to determine the business use case viability for these technologies to make the Philippine payments system more efficient and safer.
The next step is to assess the programmability feature of CBDC technology. A programmable CBDC is more efficient and can streamline and reduce settlement risk. This will minimize liquidity issues in the national payment systems.
The BSP has collaborated with multilateral organizations such as the International Monetary Fund and the BIS Innovation Hub on the technical, risk management, and governance aspects of the pilot CBDC project.
Both the BSP and an initial seven participating financial institutions, which are mostly banks, selected Hyperledger Fabric as the distributed ledger technology (DLT) for its wholesale CBDC pilot project. This DLT allows data and transactions to be recorded, shared, and synchronized across a distributed network of different participants.
Participating financial institutions include BDO Unibank Inc.; China Banking Corp.; Land Bank of the Philippines; Rizal Commercial Banking Corporation; Union Bank of the Philippines; and Maya Philippines Inc.
Some financial institutions will be included for succeeding stages, such as Citibank N.A. Manila, China Bank Savings, Wealth Development Bank Corporation, and SeaBank Philippines Inc.