The International Monetary Fund has advised the Bangko
Sentral ng Pilipinas to sharpen its strategy for a wholesale central bank
digital currency before progressing to more sophisticated stages of testing,
emphasizing that ambition alone is insufficient without clear objectives and
measurable outcomes.
According to the IMF's technical assistance report, the
Philippine central bank must define precisely what problems a wholesale CBDC is
expected to solve. Stronger legal protections, well-defined success indicators,
and explicit decision-making thresholds should be embedded into the roadmap to
ensure that future experiments generate meaningful policy insights rather than
isolated technological demonstrations.
Unlike retail CBDCs designed for everyday consumer
transactions, a wholesale CBDC serves financial institutions. It represents a
digital version of central bank money that can be used by banks and other
authorized entities to settle transactions. In practical terms, the concept
resembles upgrading the country's financial plumbing. The goal is not to
redesign the entire house, but to determine whether newer infrastructure can
move money faster, more securely, and at a lower cost.
The IMF recommended that the BSP adopt a phased
implementation strategy. The initial stage should focus on allocating
resources, aligning policy priorities, assessing whether the technology
genuinely fits the identified use cases, and maintaining continuous dialogue
with stakeholders. Only after these foundational steps are completed should the
central bank advance toward deeper research and experimentation.
At the center of the discussion are two areas where
wholesale CBDC could potentially provide value.
One is the settlement of tokenized government securities. As
governments and financial institutions increasingly explore the digitization of
financial assets, questions emerge regarding how these assets can be exchanged
efficiently. The IMF suggested that the BSP collaborate closely with the Bureau
of the Treasury and other relevant parties to determine whether wholesale CBDC
can function as the digital cash component needed to complete these
transactions smoothly.
The second priority involves cross-border payments, an area
long criticized for high fees, lengthy processing periods, and fragmented
systems. Before conducting international wholesale CBDC transactions, however,
the IMF said the BSP should identify viable payment corridors, select potential
partner jurisdictions, and carefully evaluate the legal, technological, and
macro-financial risks involved.
The Philippines has already laid the groundwork for these
discussions. The BSP began examining central bank digital currencies in 2020
and formally pursued a wholesale model through Project Agila in 2022. Its
initial sandbox initiative tested interbank transfers and round-the-clock
settlement capabilities using distributed ledger technology. The pilot also
demonstrated the potential issuance and settlement of tokenized securities
within the same ecosystem.
Insights contained in the IMF report stemmed from a
technical assistance mission conducted from Nov. 26 to Dec. 4, 2024. The
exercise brought together a broad range of participants, including nine
financial institutions involved in Project Agila, the Bankers Association of
the Philippines, the Securities and Exchange Commission, the Bureau of the
Treasury, and operators of key financial market infrastructures.
These consultations highlighted persistent weaknesses in the
country's wholesale payment environment. Stakeholders pointed to restricted
settlement windows, disconnected payment networks, elevated transaction costs,
inefficiencies in cross-border transfers, and the continuing need to deepen the
Philippine capital market.
Even so, the IMF cautioned policymakers against viewing
wholesale CBDC as a universal remedy.
The institution stressed that digital central bank money
should be evaluated alongside other policy and technological alternatives.
While wholesale CBDC may address specific inefficiencies, it is not
automatically superior to existing solutions and cannot independently resolve
every structural challenge facing the financial system.
For that reason, the IMF urged the BSP to build discipline
into its experimentation process. The central bank should establish key
performance indicators for each use case, define clear go or no-go decision
points, and identify measurable standards that determine whether a project
should advance, pause, or be discontinued.
Equally important, the report underscored the need to
reinforce cybersecurity defenses, strengthen operational resilience, and
develop a robust legal framework capable of supporting wholesale CBDC testing.
The IMF's message is ultimately one of strategic caution rather than resistance to innovation. The question is no longer whether digital technologies can reshape financial markets. Instead, it is whether policymakers can distinguish between promising ideas and practical solutions. For the BSP, success will depend not on how quickly it embraces experimentation, but on how rigorously it evaluates whether wholesale CBDC delivers tangible benefits to the Philippine financial system.
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