BSP to pilot test  wholesale digital currency ’til 2024

THE BANGKO SENTRAL ng Pilipinas’ (BSP) pilot project that tests the use of wholesale central bank digital currency (CBDC) among selected financial institutions will run until 2024, an official said on Wednesday.

“This project was launched in 2022 and will run until 2024. The coverage of the pilot project is wholesale CBDC whereby the BSP will use the test and learn approach using a sandbox environment,” BSP Currency Policy and Integrity Department Director Eloisa T. Glindro said during the central bank’s 4^th Regional Macroeconomic Conference Series virtual event.

“So, this will involve transfers of large value transactions among a limited number of participating financial institutions,” Ms. Glindro said.

The BSP last year launched the CBDCPh project to better understand the opportunities and risks of wholesale CBDC, as well as address gaps in the national payment system.

The project covers areas including policy and regulatory considerations, technological infrastructure, governance and organizational requirements, legal matters, payment and settlement models, reconciliation procedures, and risk management.

“The objectives of this project are very modest. One is to build a necessary capacity within the BSP as well as with supervised financial institutions to have that hands-on knowledge on the functionality, architecture, as well as the operational and organizational requirements for CBDC,” Ms. Glindro said.

“Second is that we want to leverage from the learnings of this pilot project in defining the roadmap for future pilot projects for other use cases like cross-border payments, intraday liquidity facility, among others, and also equity settlement,” she added.

The project is led by a management team from multilateral institutions and international standard-setting bodies to ensure coverage of critical operational areas.

The BSP chose to focus on the wholesale aspect of CBDCs as it is mainly restricted to banks and other financial institutions. Retail CBDC is intended for the general public.

CROSS-BORDER PAYMENTS

“We are currently talking to other central banks in Asia to make cross-border payments more affordable and efficient,” Monetary Board Member Eli M. Remolona, Jr. said in Filipino.

The BSP earlier signed a memorandum of understanding (MoU) with other central banks in the Association of Southeast Asian Nations to strengthen collaboration on payment connectivity.

The MoU on Cooperation in Regional Payment Connectivity was signed on the sidelines of the G20 Leaders’ Summit with the Bank of Indonesia, Bank Negara Malaysia, Monetary Authority of Singapore, and Bank of Thailand on Nov. 14 in Bali, Indonesia.

The memo is expected to contribute in accelerating economic recovery and promoting growth as it aims to foster a more inclusive financial ecosystem by enabling fast, seamless, and cheaper cross-border payments across the region.

The cross-border payment connectivity will support and facilitate international trade, investment, and other economic activities, the BSP earlier said.

By this year, the central bank hopes 50% of payments, both in volume and in value, will be done online, while increasing the number of adults with bank accounts to 70%. — Keisha B. Ta-asan