BSP digital currency shaping up

The Bangko Sentral ng Pilipinas (BSP) has completed the testing for its revived wholesale central bank digital currency (CBDC) initiative, dubbed “Project Agila.”

In a statement on Thursday, the BSP said the CBDC would allow financial institutions to transfer funds to each other even during off-business hours, including evenings, weekends and holidays.

The recently completed evaluation—done with the participation of financial companies—covered functional, performance, security, exploratory, end-to-end and programmability testing.

“Wholesale CBDCs are expected to enhance liquidity management, reduce settlement risks and support financial stability,” BSP Governor Eli Remolona Jr. said.

“Insights from this project will guide the BSP’s CBDC road map. Our goal is to leverage new technologies to further enhance the efficiency and resilience of the national payment system,” Remolona added.

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

While a CBDC is a digital currency, it is different from cryptocurrencies, which are mostly privately issued and do not have any central entity to back them.

Wholesale CBDCs may be issued to commercial banks and other financial institutions to settle interbank payments, securities transactions and cross-border payments, among others.

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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.

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.

The BSP also worked with multilateral organizations—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.

So far, the BSP is still cool to exploring a retail CBDC, saying there’s still no clear use case for such a type of digital money in the country.