BSP keen on digital currency for wholesale payments

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) sees the greatest potential for a wholesale central bank digital currency (CBDC) in settling financial securities and large-value cross-border payments, though it concluded that the case for a retail CBDC remains less compelling for now.

This was highlighted in the BSP’s “Project Agila” report, which aims to help the central bank and participating financial institutions explore potential use cases of CBDCs.

READ: BSP digital currency shaping up

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CBDC is a form of digital money denominated in the national unit of account and is a direct liability of the central bank.

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While CBDC is a digital currency, it is different from cryptocurrencies, which are privately issued and do not have any central entity to back them.

Wholesale CBDCs may be issued to commercial banks and other financial institutions to settle interbank payments, securities transactions and cross-border payments, among others. Much like the current Real-Time Gross Settlement system, wholesale CBDC will allow each bank to maintain an account with the BSP.

“Wholesale CBDCs can enhance efficiency in the payments infrastructure and develop new financial services that could address evolving needs in the national payments ecosystem,” BSP Governor Eli Remolona Jr. said.

In 2020, the BSP established a technical working group to investigate CBDC technologies. This initiative aligned with global trends as central banks worldwide began exploring the distributed ledger technology underlying cryptocurrencies to enhance their national currencies.

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READ: Philippine CBDC: How digital money might work in the country

To build institutional knowledge of CBDC functionalities and relevant technologies, the BSP launched its wholesale CBDC project in 2022. Initially named Project CBDCPh, it was later rebranded as Project Agila.

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“The BSP envisions a future where wholesale CBDCs transform financial markets and cross-border payments through speed, efficiency and trust,” the report read.

Meanwhile, the BSP’s assessment also determined that retail CBDC applications were not an immediate priority, citing “the continued progress in digital retail payments and financial inclusion initiatives.” INQ

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