The Bangko Sentral ng Pilipinas (BSP) has pushed through with the pilot project of a wholesale central bank digital currency (CBDC) as part of its efforts to promote the stability of the country’s payment system.
Dubbed Project CBDCPh, the pilot will test the use of CBDCs for large-value financial transactions on a 24/7 basis across a limited number of financial institutions.
During the recent 14th Annual Group of 24/Alliance for Financial Inclusion Policymakers’ Roundtable discussion at the International Monetary Fund -World Bank Spring Meetings, BSP Governor Benjamin Diokno said the pilot testing marks a major step not only for the Philippine central bank but also for the entire finance industry to better understand the opportunities and risks of wholesale CBDCs.
“The learnings from the pilot will be critical in constructing the BSP’s medium- to long-term roadmap for more advanced wholesale CBDC projects that shall further strengthen the Philippine payment system,” Diokno said.
Project CBDCPH is led by an intersectoral project management team to ensure coverage of critical operational areas. These include policy and regulatory considerations, technological infrastructure, governance and organizational requirements, legal matters, payment and settlement models, reconciliation procedures, and risk management.
In contrast to general purpose or retail CBDC intended for use of the general public, the BSP chief said a wholesale CBDC is restricted mainly to banks and other financial institutions.
Diokno explained that a wholesale CBDC may contribute to addressing frictions on large cross-border foreign currency transfers, settlement risk exposure from using commercial bank money in equities, and operating an intraday liquidity facility.
The BSP is exploring the potential use of wholesale CBDCs in areas where these can yield the greatest value-adding benefits to the payment system.