BSP completes testing of wholesale central bank digital currency

The Bangko Sentral ng Pilipinas (BSP) has completed the testing for Project Agila, the proof-of-concept for its wholesale Central Bank Digital Currency (CBDC) pilot, which aims to orient the central bank and participating financial institutions on technology solutions for large-value payments.

While the BSP did not release the findings, it said the evaluation with financial institutions covered functional, performance, security, exploratory, and 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 in a statement on Thursday.

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

CBDCs are digital money denominated in the national unit of account and are direct liabilities of the central bank, in this case the Philippine peso and the BSP.

Wholesale CBDCs may be used by commercial banks and other financial institutions for interbank payments, securities, transactions, and cross-border payments.

The completion of the pilot run is in line with the target of the central bank to have it finished by the end of the year, as it seeks to assist the central bank and financial institutions in exploring and testing the potential of CBDCs while evaluating if they can improve the large-value payment system.

According to BSP Deputy Governor Mamerto Tangonan, the central bank is set to do roadmapping for the wholesale CBDC in January.

“Roadmapping like okay, knowing what we know now that we didn’t know before, how do you want to use this? Where do you want to go forward? You want to launch this already, or do we do a second round of proof of concept?” he said in a recent interview.

Tangonan said the wholesale CBDC could possibly be used for cross-border trade finance and security settlement transactions.

He said that while benefits have already been identified for a wholesale CBDC, the central bank has yet to see the need for a retail CBDC.

“Wholesale kasi wala kaming makitang convincing benefit for retail. Sa wholesale, kita na namin ‘yung potential benefits (wholesale because we do not see a convincing benefit for retail. In wholesale, we already see the potential benefits),” he said.

“Let’s say kung may gaps ang current digital payment system natin, we’ll think of issuing a retail CBDC,” he added. 

(Let's say if there are gaps in our current digital payment system, we’ll think of issuing a retail CBDC.)— VBL, GMA Integrated News