Deputy Governor Mamerto Tangonan disclosed in a press briefing last March 6 that the Bangko Sentral ng Pilipinas (BSP) plans to finish its pilot run of the wholesale Central Bank Digital Currency (CBDC) project or the Project Agila by the end of 2024. 

Philippine CBDC Update

“For CBDC… our timeline for that is to complete the pilot this year, towards the end of this year,” Tangonan stated. 

According to the BSP, it plans to issue wholesale CBDCs to commercial banks and financial institutions for various purposes such as settling interbank payments, securities transactions, and cross-border payments. 

Tangonan stated that the pilot run of the project aims to facilitate a learning exercise to evaluate the technology’s claims and effectiveness. 

Six domestic financial institutions, including BDO Unibank Inc., China Banking Corp., Land Bank of the Philippines, Rizal Commercial Banking Corporation, Union Bank of the Philippines, and Maya Philippines Inc., are participating in the pilot project to evaluate the functionality and potential benefits of the CBDC.

(Read more: List of 10 Major Philippine Banks in BSP CBDC Project)

“We are using it to transfer funds among these financial institutions. But we also like to see if this wholesale CBDC can be used for higher value-adding services like securities settlement… We envision a Philippines where access to securities and similar investment instruments can be democratized, meaning they could be purchased for smaller issue sizes and much much lower fees so that any Juan or Maria cannot only dream but actually own securities,” Tangonan said.

Accordingly, BSP Governor Eli Remolona Jr. announced that upon completion of Project Agila’s pilot run, both the central bank and the banking sector will evaluate the potential launch of wholesale CBDCs nationwide.

Read: Global Perspectives: The List of Countries With CBDC Initiatives 

Prior to this announcement, last month, Remolona revealed plans for the Philippines to introduce its CBDC within two years to compete with volatile cryptocurrencies. According to him, the launch may happen as early as next year or by 2026. 

Unlike other CBDCs, the Philippines’ version won’t use blockchain technology; the central bank stated that the technology behind PhilPaSSPlus, BSP’s real-time gross settlement payment system, is being evaluated for potential use. The country’s CBDC will be wholesale, involving banks exclusively for transactions, aiming to improve efficiency and safety in payments.

Previously, last September, the central bank chose Hyperledger Fabric as the technology backbone for its pilot wholesale CBDC project. Although not explicitly mentioned as blockchain by the BSP, Hyperledger Foundation acknowledges itself as such on its website.

What is Project Agila?

A CBDC, or Central Bank Digital Currency, is a digital form of currency issued and regulated by a nation’s central bank, serving as both a medium of exchange and a store of value. Essentially, it represents the digital version of a country’s traditional currency. Unlike cryptocurrencies, CBDCs are centrally controlled and subject to regulation by the central bank, with their value influenced by factors such as the country’s monetary policies and trade balance.

Read: CBDC Impact on Crypto in the Philippines

The Philippines started establishing its own CBDC in December 2020 when the idea surfaced in Congress, prompting the creation of a technical working group. 

Initially hesitant, then-BSP Governor Benjamin Diokno expressed no immediate intentions for a CBDC in February 2022 due to the country’s reliance on cash and robust payment systems. However, a shift occurred in March when Diokno acknowledged global interest in CBDC projects following an AMRO report, leading to the initiation of Project CBDCPh. 

By April, the BSP formally confirmed the pursuit of a wholesale CBDC pilot project, and discussions commenced with banks and financial institutions to commence testing by the end of 2022. 

In October, the BSP announced CBDC adoption in response to a UNESCAP recommendation to spur economic growth. The continuity of the CBDC pilot was affirmed by then-newly appointed BSP Governor Felipe Medalla in January 2023, signaling a commitment to exploring the potential of digital currencies in the Philippine financial landscape.

This article is published on BitPinas: BSP: CBDC Pilot Completion by the End of 2024

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