by Jan Michael Carpo, Reporter
A Philippine central bank executive announced recently that the pilot testing of the Central Bank Digital Currency (CBDC), also known as Project CBDCPh, will continue until 2024 in select financial institutions. The pilot testing will only be made available to a select group of participating financial institutions since it involves the transfer of large-value transactions.
Eloisa Glindro, director of the Bangko Sentral ng Pilipinas (BSP) Currency Policy and Integrity Department, made the announcement during the 4th Regional Macroeconomic Conference Series (RMCS) for Southern Luzon. The virtual event was held earlier this month with BSP chief Felipe M. Medalla as the guest speaker.
“This project’s goals are really modest. To have that practical knowledge of the functionality, architecture as well as operational and organizational requirements for CBDC, one must first establish the requisite capability inside the BSP as well as with monitored financial institutions,” Glindro explained.
Additionally, she emphasized that the initiative’s goal is to use the lessons learned from the pilot project “in creating the roadmap for future pilot projects for various use cases including cross-border payments, intraday liquidity facility, among others, and also equity settlement.”
“This undertaking began in 2022 and will last until 2024. The pilot project will cover all CBDCs, and the BSP will employ a test-and-learn strategy while operating in a sandbox environment,” she added.
Former BSP governor and current Secretary of Finance Benjamin Diokno made the initial announcement about the launch of Project CBDCPh in March last year. At that time, he said that the project is in keeping with the growing attention being paid to CBDCs by international and regional multilateral organizations such as Asian Development Bank (ADB), the Bank for International Settlements (BIS), and the International Monetary Fund (IMF).
Wholesale aspect of CBDC will be restricted to banks, financial institutions
According to BSP Governor Felipe Medalla, since retail CBDC is meant mainly for the general public, the wholesale aspect of CBDC will primarily be restricted to banks and other financial institutions.
Earlier this year, the BSP chief also confirmed that the monetary agency will continue the pilot testing of CBDC in businesses, governments, and financial institutions.
A CBDC is a type of digital currency that is controlled, issued, and regulated by a country’s central bank. It can be used as a medium of trade, or a store of value. It is different from e-money in that it is essentially a national bank’s traditional currency but in digital form.
Also, unlike cryptocurrencies, the supply and value of CBDCs are usually determined by the monetary policies of a nation as well as its trade surpluses and similar other factors.
In April last year, the BSP declared that it will proceed with the pilot test project of wholesale central bank digital currency (CBDC) to support the integrity of the nation’s payment system.
The initiative, according to the central bank, will help address issues on governance, organizational requirements, technology infrastructure, policy and regulatory considerations, as well as legal issues, payment and settlement models, reconciliation processes, and risk management.
According to the BSP, a management team coming from multilateral organizations and international standard-setting agencies will be put in charge of the project to ensure coverage of all the important areas of operation.
BSP working to make cross-border payments more reasonable and effective
Eli M. Remolona, Jr., a member of the Monetary Board, also gave the public the assurance that the BSP is continuing to work with a number of countries and banks in Asia to make cross-border payments more reasonable and effective for the time being.
“Connectivity for cross-border payments will help and facilitate commerce, investment, and other economic activity on a global scale,” Remolona said.
He added that in November last year, the BSP signed a memorandum of understanding (MoU) with other central banks affiliated with the Association of Southeast Asian Nations (ASEAN) in an effort to improve coordination on payment connectivity.
According to him, the Bank of Indonesia, Bank Negara Malaysia, the Monetary Authority of Singapore, and the Bank of Thailand signed the Memorandum of Understanding (MoU) of cooperation in Regional Payment Connectivity during the G20 Leaders’ Summit in Bali, Indonesia.
The deal will enable quick, easy, and less expensive cross-border transfers throughout the area, which will encourage a more inclusive financial ecosystem and speed up the country’s economic recovery.