Digital peso in the Philippines: Ready or not?

CHEAPER cross-border remittances, greater financial inclusion, enhanced liquidity management, reduced settlement risks, and financial stability support are the many promises of central bank digital currency (CBDC) to the country's financial landscape.

- By Lourdes O. Pilar

But would a digital peso work in the Philippine financial system?

A CBDC is a form of digital currency issued by a country's central bank. It was like crypto-currencies, except that its value is fixed by the central bank and is equivalent to the country's fiat currency.

Last year, the country's central bank completed its testing phase for Project Agila, its prototype wholesale CBDC.

Rizal Commercial Banking Corp. (RCBC) views the potential adoption of a CBDC as a strategic move toward modernizing the Philippine financial ecosystem.

"CBDCs provide a secure, efficient, and transparent alternative to physical cash, enabling real-time, government-backed digital settlements that enhance the integrity of payments nationwide," said Angelito M. Villanueva, RCBC executive vice-president and chief innovation and inclusion officer.

China Banking Corp. (Chinabank) recognizes that the adoption of wholesale CBDC technology can bring significant benefits to the banking system.

"Through Project Agila, we have observed that wholesale CBDC (wCBDC) can facilitate 24/7 domestic fund transfers, leading to enhanced efficiency in interbank settlements and faster turnaround times for financial transactions," said Delfin Jay M. Sabido IX, Chinabank chief innovation and transformation officer.

There are two types of CBDC, wholesale and retail. Financial institutions are the primary users of wholesale CBDCs in which the BSP is introducing in the country, while retail CBDC are for consumers' and businesses' use.

Financial institutions included in the pilot study see CBDCs as a powerful enabler and have the potential to promote broader financial inclusion.