The Philippines is moving forward with a wholesale CBDC

Written by Kapronasia || September 18 2023

The Philippines is moving forward, at least tentatively, with plans to develop a wholesale central bank digital currency (CBDC) and has selected a technology partner for its first digital peso pilot Project Agila. Bangko Sentral ng Pilipinas (BSP) has decided to go with Hyperledger Fabric, an open-source blockchain framework hosted by the Linux Foundation.

Launched in 2015, Hyperledger Fabric is a modular, general-purpose framework that provides unique identity management and access control features. It is useful for industry applications such as supply chain management, trade finance, loyalty and rewards, and clearing and settlement of financial assets.

It seems that the BSP selected Hyperledger Fabric primarily because it is built on distributed ledger technology (DLT) and has clear applications within the financial services sector. According to Philippine media, the country’s central bank believes that DLT will be handy for testing Project Agila's use-case scenario of enabling inter-institution fund transfers even during off-business hours, or when PhilPaSS Plus, the country’s peso real-time gross settlement payment system, is unavailable.

There will be banks participating in the pilot as well as lenders with the role of observers. Those participating, which will test the use of the wholesale CBDC in a sandbox environment, include incumbents BDO Unibank, China Banking Corporation, Land Bank of the Philippines, Rizal Commercial Banking Corporation and Union Bank of the Philippines, as well the fintech Maya Philippines. Among the observers are Citibank, China Bank Savings, Wealth Development Bank Corporation and the digital lender SeaBank Philippines.

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

Like most Southeast Asian countries, the Philippines is mulling the use of a CBDC, though it ruled out a digital peso for retail transactions earlier this year. The Philippine central bank likely recognizes that existing digital payment methods are already accelerating its financial inclusion goals and that a CBDC probably would not have a significant impact on these goals since Filipinos already have so many choices for retail payments.

On the other hand, the BSP believes a wholesale CBDC could help to address frictions on large cross-border foreign currency transfers, settlement risk exposure from using commercial bank money in equities and operating an intraday liquidity facility.