Philippines tests CBDC to strengthen payment system

Philippines tests CBDC to strengthen payment system - Philippines palwanThe de facto central bank of the Philippines - Bangko Sentral ng Pilipinas (BSP) - is pursuing efforts to strengthen its payment system by launching a wholesale CBDC pilot project.

Philippines tests wholesale CBDC

The bank has proceeded with an experiment that will test the use of central bank digital currencies (CBDCs) for large-scale financial transactions "on a 24/7 basis through a limited number of financial institutions," the bank noted.

As reported by FX Empire in March, bank governor Benjamin E. Diokno said the country's CBDC pilot - dubbed CBDCPh - will be launched in the "short term". The decision came after the central bank analyzed various aspects of the CBDC implementation.

The BSP governor announced the update on Wednesday during a policy roundtable. Diokno said the CBDCPh marks an important step in understanding the opportunities and risks associated with wholesale CBDCs.

"The pilot's lessons will be instrumental in building the BSP's medium and long-term roadmap for more advanced wholesale CBDC projects that will further strengthen the Philippine payment system."

What is the CBDCPh project?

Implemented by the BSP, the CBDCPh project provides a comprehensive perspective on the potential implications of CBDCs in the country's financial system. It hopes to address the frictions in the current national payment system, in areas such as security and trustworthiness.

According to Diokno, a wholesale CBDC would examine problems in "large cross-border transfers of foreign currency, exposure to settlement risk and the use of commercial bank money in shares, and the management of an intraday liquidity structure."

The announcement noted that a cross-sector project management team leads the CBDCPh to ensure coverage of critical operational areas.

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