THE Bangko Sentral ng Pilipinas (BSP) is on track to launching its own central bank digital currency (CBDC) within the term of Governor Eli Remolona Jr., a senior official said, with a pilot project set to be finished this year.

"The governor is very early in his term and we're already about to conclude proof of concept," BSP Deputy Governor Mamerto Tangonan told reporters.

Remolona was appointed in June last year to serve a six-year term.

CBDCs, which are similar to cryptocurrency, are essentially digital versions of a country's fiat currency that are direct liabilities of the issuing central bank.

The BSP last year revived Project Agila, a CBDC pilot project that was halted by Remolona's predecessor, Benjamin Diokno. Tongonan in March said the project could be completed by the end of 2024.

"If after a proof of concept that now brings the literacy and the knowledge of both BSP and the banks to a level that they are ready to launch it, then only at such time will we make a decision whether to go or no go," he told reporters on Tuesday.

The BSP, he added, would have to ensure that it can "offer, maintain, and operate it (the CBDC) safely" while also confirming that banks can do the same and have a viable business use case.

Project Agila aims to educate the central bank and collaborating financial institutions about CBDC technology solutions that could improve the country's large-value payment system.

The BSP is looking at issuing wholesale CBDCs that commercial banks and other financial institutions can use for the settlement of interbank payments, securities transactions, cross-border payments, and other purposes.

It is not expected to issue a CBDC for retail payments, having found minimal added value from such, given increased domestic adoption of digital payment methods.

Bridget Rose Mesina-Romero, director of the BSP's Payments Policy and Development Department, said phase one of the project was already complete, with the HyperLedger Fabric platform having been chosen for sandbox experiments.

Two test runs were conducted from May to June, she added, which resulted in the initial phase being finished in seven weeks.

Mesina-Romero said they wanted to "determine if there is business use case viability of these technologies ... to be able to make our payments system more efficient and safer."

Four criteria — functionality, performance, security and end-to-end testing — were used for the tests.

Mesina-Romero also said that they would be evaluating the programmability of CBDC technology, which can automate and streamline processes, reduce the number of intermediaries and back-office arrangements, and lower settlement risk.

"At the end of this project which is towards the end of this year, we'll be issuing our report containing all of our findings and assessment with respect to our sandbox test experiments on Project Agila," she said.