The Philippine central bank announced on Thursday (September 7) that it has selected a technology partner for its wholesale central bank digital currency (CBDC) pilot project.

In a statement, the Bangko Sentral ng Pilipinas (BSP) says Hyperledger Fabric will work on the distributed ledger technology (DLT) for 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 says. 

CBDCs are a form of digital money denominated in the national unit of account and are direct liabilities of the central bank. Wholesale CBDCs are digital currencies that can be issued to commercial banks and other financial institutions to settle interbank payments, securities transactions, cross-border payments, and other similar transactions. 

Meanwhile, DLT is a digital system for recording asset transactions in multiple places simultaneously. Unlike traditional databases, DLTs have no central data storage. 

The BSP says it decided on DLT as this technology allows data and transactions to be recorded, shared, and synchronized across a distributed network of different participants. It would be a useful mechanism for testing Project Agila's use-case scenario of enabling inter-institution fund transfers even during off-business hours, or when PhilPaSS Plus, the country’s peso real-time gross settlement payment system, is unavailable.

Hyperledger Fabric was selected “through a rigorous process that included system demonstrations, walkthrough procedures, and a scoring system, covering the systems' access, security, 24/7 availability, interoperability, and programmability, the central bank says.

Sandbox environment

Several lenders will be participating in Project Agila, including BDO Unibank, China Banking Corporation, Land Bank of the Philippines, Rizal Commercial Banking Corporation, Union Bank of the Philippines, and Maya Philippines. 

Meanwhile, Citibank, China Bank Savings, Wealth Development Bank Corporation, and SeaBank Philippines will serve as observing financial institutions.

Participants will test the use of the wholesale CBDC in a sandbox environment.

“By the end of Project Agila, the pilot participants are expected to have a clearer understanding of CBDC technology and assess the capability of wholesale CBDCs to foster advancements in the large-value payment system,” says BSP governor Eli Remolona, Jr.  

The BSP will be guided by the results of the assessment and the pilot in deciding whether it’s possible to launch wholesale CBDCs in the Philippines.

It will also continue to collaborate with multilateral organizations, such as the International Monetary Fund and the Bank for International Settlements Innovation Hub, on the technical, risk management, and governance aspects of the CBDC project.