Philippine Central Bank Progresses with Wholesale Central Bank Digital Currency (wCBDC) Study

Mamerto Tangonan, the deputy governor for payments and currency management sector at the Bangko Sentral ng Pilipinas (BSP), disclosed further insights into the central bank’s exploration of wholesale central bank digital currency (wCBDC).

Project Agila: A Learning Exercise

Dubbed Project Agila, the wCBDC pilot initiative aims to conclude by the year’s end. Tangonan emphasized its significance as a “learning exercise,” envisioning broader access to securities and investment instruments, thereby democratizing financial opportunities for all Filipinos.

Six prominent domestic banks, including BDO Unibank, China Banking Corp., and Union Bank of the Philippines, are actively participating in the pilot alongside the BSP. The project leverages wCBDC for interbank fund transfers and explores its potential applications in securities settlement.

Tangonan highlighted the aspiration to extend wCBDC’s utility beyond fund transfers to encompass higher value-adding services like securities settlement, underscoring the project’s multifaceted exploration.

Consideration for Wholesale CBDC (wCBDC)

BSP governor Eli Remolona previously articulated the central bank’s preference for a wCBDC over a retail counterpart, citing concerns regarding bank disintermediation and related issues. Notably, the envisaged wCBDC would not operate on a blockchain infrastructure.

The journey towards wCBDC experimentation began in 2020 when the BSP expressed interest in CBDC issuance. Initial assessments led to the formulation of Project CBDCPh, with pilot tests slated for commencement in 2022, eventually evolving into Project Agila.

In 2023, the Philippines participated in a pilot study exploring retail CBDC’s potential applications in remittances, collaborating with the Digital Dollar Project, Western Union, and BDO Unibank. While the study revealed promising cost reductions and enhanced transparency, challenges persist, particularly in transaction speed optimization.