BSP revives digital currency project

MANILA  -The Bangko Sentral ng Pilipinas is gearing up for a trial or pilot project for its revived wholesale Central Bank Digital Currency (CBCD) initiative, dubbed Project Agila.

CBDCs are a form of digital money denominated in the national unit of account and are direct liabilities of the central bank.

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 2022 balked at plans to use CBDCs for large-scale transactions through “Project CBDCPh, with then Governor Benjamin Diokno saying that existing digital payment systems turned out to be better options.

READ: BSP to explore use of digital currency

Now with a new name, the project is aimed at orienting the BSP and participating financial institutions on CBDC technology solutions that have the potential to enhance the country’s large-value payment system.

Those taking part in the pilot include BDO Unibank Inc., China Banking Corp., Land Bank of the Philippines, Rizal Commercial Banking Corp., Union Bank of the Philippines, and Maya Philippines Inc.
Meanwhile, observing financial institutions for succeeding stages are Citibank N. A. Manila, China Bank Savings, Wealth Development Bank Corporation, and SeaBank Philippines, Inc.

For this purpose, the central bank chose Hyperledger Fabric as the distributed ledger technology (DLT) for Project Agila.

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With help from select financial institutions, the BSP decided on DLT as this technology allows data and transactions to be recorded, shared, and synchronized across a distributed network of different participants.

DLT is deemed as a useful mechanism for testing Project Agila’s use-case scenario of enabling inter-institutional fund transfers even during off-business hours — evenings, weekends, and holidays — or when the BSP’s PhilPaSSplus system is not available.

The BSP said Hyperledger Fabric was selected through a rigorous process that included system demonstrations, walkthrough procedures, and a scoring system, covering the systems’ access, security, 24/7 availability, interoperability and programmability.

“By the end of Project Agila, the pilot participants are expected to have a clearer understanding of CBDC technology and assess the capability of wholesale CBDCs to foster advancements in the large-value payment system,” BSP Governor Eli Remolona Jr. said.

Remolona added that the results of the assessment are seen to guide the BSP and the industry on a possible launch of wholesale CBDCs in the Philippines.

“With the goal of further enhancing the efficiency and safety of the national payment system, we will use learnings from the project as input for crafting BSP’s wholesale CBDC project roadmap,” the BSP chief added.

The BSP also worked with multilateral organizations — such as the International Monetary Fund and the Bank for International Settlements Innovation Hub — on the technical, risk management, and governance aspects of the pilot CBDC project.