The Bangko Sentral ng Pilipinas (BSP) has successfully concluded testing for “Project Agila,” a groundbreaking initiative that leverages cutting-edge technology to enable seamless fund transfers between financial institutions (FIs) even outside traditional banking hours.
This includes evenings, weekends, and holidays — a major step toward modernizing the Philippines’ financial system.
In 2023, the BSP announced the selection of Hyperledger Fabric as the distributed ledger technology (DLT) for its wholesale Central Bank Digital Currency (CBDC) pilot project: Project Agila, formerly known as “Project CBDCPh.” Project Agila aims to orient the BSP and participating financial institutions on CBDC technology solutions that have the potential to enhance the country’s large-value payment system.
BSP exploring wholesale CBDCs
Project Agila serves as a proof-of-concept for the BSP’s exploration of CBDCs at the wholesale level.
Unlike retail CBDCs, which are intended for public use, wholesale CBDCs are designed for commercial banks and other FIs, facilitating interbank payments, securities transactions, and cross-border payments.
“Wholesale CBDCs are expected to enhance liquidity management, reduce settlement risks, and support financial stability,” BSP Governor Eli M. Remolona, Jr. said in a press statement.
He added that the insights gained from this initiative will shape the BSP’s roadmap for CBDC adoption, with a focus on leveraging advanced technologies to boost the resilience and efficiency of the national payment system.
CBDCs are a form of digital money denominated in the national currency and directly backed by the central bank. While they share similarities with cryptocurrencies in their digital nature, they differ significantly by being fully regulated and issued by a central authority.
Harnessing distributed ledger technology
The innovative aspect of Project Agila lies in its integration of open-source distributed ledger technology (DLT), supported by the Oracle Cloud Infrastructure.
This robust system ensures secure, reliable, and efficient transactions among financial institutions, providing a strong foundation for real-world applications.
The testing process was rigorous, covering functional, performance, security, exploratory, end-to-end, and programmability evaluations. This comprehensive approach guarantees that the technology is secure, efficient, and capable of handling large-value transactions with minimal risk.
Benefits for financial institutions
One of the key outcomes of Project Agila is the ability of FIs to conduct fund transfers outside standard banking hours, a feature that addresses the needs of an increasingly digital economy.
This capability could significantly improve liquidity management, reduce settlement risks, and bolster the overall stability of the financial system.
The BSP’s wholesale CBDC initiative aligns with its broader goal of fostering a modern, inclusive, and resilient financial ecosystem. By reducing operational bottlenecks and enhancing efficiency, the project has the potential to transform the country’s large-value payment systems.
Pioneering financial innovation
The use of CBDCs was first introduced by former BSP Governor Benjamin Diokno in 2021, highlighting their potential to modernize financial systems globally. Since then, central banks in countries like China have also experimented with CBDCs, showcasing their ability to revolutionize financial infrastructure.
In a press statement, BSP Governor Remolona emphasized that Project Agila’s findings will serve as a cornerstone for the BSP’s future strategies, ensuring the Philippines remains agile and prepared for the next wave of financial technology advancements.
As the BSP continues to refine its CBDC roadmap, the successful testing of Project Agila marks a significant milestone in the evolution of the Philippine financial system.
Wholesale CBDCs represent an opportunity to modernize interbank transactions, enhance security, and streamline operations in ways that benefit not only FIs but also the broader economy.
With its focus on innovation and resilience, the BSP is setting the stage for the Philippines to remain at the forefront of financial technology. As the central bank explores the full potential of CBDCs, Project Agila stands as a testament to its commitment to fostering a more dynamic, efficient, and inclusive financial future.
This initiative not only positions the Philippines as a regional leader in financial innovation but also reflects the BSP’s dedication to leveraging technology to address evolving economic challenges. Through Project Agila, the nation moves closer to realizing a more robust, forward-looking financial ecosystem.