The Philippines is on track to conclude its pilot program for a wholesale central bank digital currency (CBDC) by the end of 2024. Launched under the codename Project Agila, the initiative has been testing the viability and potential benefits of a digital Philippine peso for use between banks and other financial institutions.
Project Agila involves six major Philippine financial institutions: BDO Unibank, China Banking Corporation, Land Bank of the Philippines, Rizal Commercial Banking Corporation, Union Bank of the Philippines, and Maya Philippines. The Bangko Sentral ng Pilipinas (BSP), the country's central bank, designed the project as a "learning exercise" to evaluate the technology and its real-world applications within the Philippine financial landscape.
The pilot program focuses on three key areas: interbank settlements, securities settlement, and cross-border payments. By using a digital currency for these transactions, the BSP hopes to streamline processes, improve efficiency, and potentially reduce costs.
The Philippines' foray into CBDCs began in 2020 with initial expressions of interest. This was followed by a more concrete step in 2022 with the announcement of Project CBDCPh, the precursor to Project Agila. The current pilot marks a significant advancement in the country's exploration of digital currencies and their potential impact on the financial sector.
One of the envisioned benefits of a wholesale CBDC is the democratization of access to securities and investment instruments. By using a digital currency, the BSP believes it can facilitate smaller investment sizes and lower fees, making these opportunities more accessible to a wider range of Filipinos. This aligns with the central bank's broader goals of financial inclusion and economic growth.
The pilot program has also sparked discussions about the underlying technology for the CBDC. While the BSP initially considered Hyperledger Fabric, a blockchain platform, recent statements suggest the final system may not rely on blockchain technology. This shift highlights the ongoing exploration and experimentation surrounding the technical aspects of CBDC implementation.
The Philippines' CBDC pilot is being closely watched by other countries in the region and around the world. The successful completion of Project Agila could pave the way for the Philippines to become one of the first countries in Southeast Asia to launch a full-fledged wholesale CBDC. The learnings and insights gained from the project will not only inform the Philippines' own CBDC strategy but also contribute to the global conversation on the potential and challenges of central bank digital currencies.