The Bangko Sentral ng Pilipinas (BSP) may issue its own central bank digital currency (CBDC) as soon as next year or by 2026 in a bid to replace the unregulated cryptocurrencies, said BSP Governor Eli M. Remolona Jr.
Remolona has hinted before that a CBDC will happen within his six-year term that started on July 3, 2023. This was the first time though, that he opened the possibility that it will come sooner than expected, mainly because developments in other countries with CBDCs such as Sweden and China have shown progress in the last year.
“Marami ng mga gumagawa. Meron na tayong pwedeng gayahin. (Many countries are doing CBDCs, we can emulate them),” said Remolona. When asked if they will issue the CBDC soon, he affirmed it is possible in the next two years.
He has expressed a special interest in the Swedish e-Krona that the central bank of Sweden or Sveriges Riksbank described as state money in digital form.
CBDCs are a form of digital money denominated in the national unit of account and are direct liabilities of the central bank. It can be an alternative payment instrument versus privately-issued cryptocurrency assets.
The BSP has already decided on a wholesale CBDC rather than retail. Wholesale CBDCs may be issued to commercial banks and other financial institutions to settle interbank payments, securities transactions, and cross-border payments, among others.
The BSP in September last year announced that it has selected the Hyperledger Fabric as the distributed ledger technology (DLT) for its wholesale CBDC pilot project.
In a recent interview, Remolona said they may use the technology that runs the PhilPaSSPlus which is the BSP’s real time gross settlement payment system.
He also ruled out the use of blockchain technology for the BSP’s CBDC.
In 2021, the BSP launched a pilot project called “Project CBDCPh” but in late 2023, this was renamed to “Project Agila” referencing the BSP’s logo featuring the Philippine Eagle.
Project Agila aims to communicate and familiarize both the BSP and participating financial institutions on the planned CBDC technology solutions.
By the end of Project Agila, Remolona hoped the results of the assessment will appropriately guide the BSP and the industry on the country’s wholesale CBDC.
Last September, the BSP said an initial seven participating financial institutions which are mostly banks, selected the Hyperledger Fabric as DLT for its wholesale CBDC pilot project. This particular DLT or technology allows data and transactions to be recorded, shared, and synchronized across a distributed network of different participants.
The objective is to test Project Agila’s use case scenario of enabling inter-institutional fund transfers even during off-business hours or when PhilPaSSplus is unavailable, said the BSP.
The seven banks in Project Agila includes 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.
After the selection of the technology for the project, participants will test the use of wholesale CBDC technology alongside PhilPaSSplus in a sandbox environment, said the BSP.
Last August, Remolona said that BSP has been studying the e-Krona of Sweden as prototype CDBC on a wholesale level.
Basically, a wholesale CBDC will reduce transaction costs, shorten processing times, and enhance the transparency of such transfers.
The BSP said financial transactions with banks using a wholesale CBDCs appear readily feasible in the Philippines while retail CBDCs would need a law or legislation.
Meanwhile retail CBDCs involve BSP directly distributing CBDCs to the public.
For now, BSP’s proof-of-concept phase on different CBDC technologies is done with the selection of the DLT.
Soon after, the conduct of prototype testing is expected to run for several months, said the BSP in a report.
In the same report, the BSP said it is expanding its CBDC technology testing and emerging use case evaluation to improve the safety and efficiency of the national payment system.
These target use cases will enable fund transfers across a limited number of financial institutions, potentially even during off-business hours or on a 24/7 basis.