BSP picks technology for central bank digital currency pilot run

The Bangko Sentral ng Pilipinas (BSP) has designated Hyperledger Fabric as the distributed ledger technology for Project Agila, its wholesale Central Bank Digital Currency (CBDC) pilot project that was previously known as Project CBDCPh.

“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,” BSP Governor Eli M. Remolona, Jr. said in a statement.

Hyperledger Fabric was chosen 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, the BSP said.

The technology will allow data and transactions to be recorded, shared, and synchronized across a distributed network of different participants.

“This would be a useful mechanism for testing Project Agila’s use-case scenario of enabling inter-institutional fund transfers even during off-business hours (i.e., evenings, weekends, and holidays) or when PhilPaSSplus is unavailable,” the central bank said.

There are six financial institutions participating in the pilot project: 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 the succeeding stages are Citibank N. A. Manila, China Bank Savings, Wealth Development Bank Corp., and SeaBank Philippines, Inc.

Following the selection of the technology for Project Agila, participants will now test the use of wholesale CBDC technology alongside PhilPaSSplus in a sandbox environment.

Project Agila will allow the BSP and participating financial institutions to familiarize themselves with CBDC technology solutions, which could enhance the Philippines’ large-value payment system, the central bank said.

“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,” Mr. Remolona said.

“The results of the assessment are seen to guide the BSP and the industry on a possible launch of wholesale CBDCs in the Philippines,” he added.

The International Monetary Fund and the Bank for International Settlements Innovation Hub also collaborated with the BSP on the technical, risk management, and governance aspects of the pilot project.

CBDCs are issued as central bank liabilities. Since 2021, the BSP has been reviewing use cases for wholesale CBDCs, as well as the potential risks and use of CBDC payments among financial institutions.

The BSP earlier said it sees opportunities from CBDCs, such as being an additional option for monetary policy action, boosting competition and innovation among financial industry players, and improved financial inclusion. — K.B. Ta-asan