Digital currency, real impact on e-commerce

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RECENTLY gave a talk on the significance of e-commerce, social media and internet marketing, with particular emphasis on cryptocurrency, at Pangasinan State University. The way we conduct transactions is rapidly evolving, making financial inclusivity and efficiency more important than ever.

Enter Project Agila, an ambitious initiative by the Bangko Sentral ng Pilipinas (BSP), aimed at exploring the potential of a wholesale Central Bank Digital Currency (CBDC) in the Philippines. This innovative project is a step toward embracing digital currencies. It is also a leap into the future of e-commerce and online transactions for every Filipino in the country.

Project Agila is a pilot project launched by the BSP to assess the viability of implementing a digital currency for transactions between banks and financial institutions. Unlike typical digital transactions that we use every day, it utilizes a form of currency that is a direct liability of the central bank, meaning it’s as legitimate and secure as the physical money in your wallet. This also represents a key milestone in the digital transformation of the Philippines’ financial services, aligning with global trends toward digital currencies and blockchain technology.

The involvement of multiple financial institutions in the pilot, both as participants and observers, fosters collaboration and shared learning. This collective effort is poised to accelerate the understanding and capabilities around CBDC technology in the Philippine financial sector.

At the heart of Project Agila is Hyperledger Fabric, a permissioned blockchain framework that offers robust privacy features, high scalability, and customizable options to meet the specific needs of financial transactions. Permissioned means all participating parties’ identities are known and authenticated. This technology allows Project Agila to ensure that digital currency transactions are fast, reliable and secure from potential cyberthreats.

By enabling digital transactions among commercial banks and financial institutions, it aims to facilitate smoother interbank payments, securities transactions, and cross-border payments. But its implications go beyond just the financial institutions; it will revolutionize the e-commerce landscape for everyday internet users in several ways once it becomes mainstream.

Imagine purchasing goods from an online store and having the payment process be as smooth and fast as sending a text message, regardless of the time or day. Project Agila aims to make this a reality by allowing financial institutions to transfer funds seamlessly, even outside of business hours. This efficiency could translate to faster processing of online payments for consumers, making e-commerce transactions more convenient.

By streamlining the process for financial transactions between institutions, it could help reduce the costs associated with these transfers. Lower costs for merchants could mean lower prices for consumers, making online shopping more affordable for everyone.

The use of Hyperledger Fabric’s blockchain technology introduces an added layer of security to financial transactions. For online shoppers, this means increased confidence in the safety of their online purchases and personal information, fostering a more secure e-commerce environment.

Project Agila aims to broaden access to financial services, making it easier for more Filipinos to participate in the e-commerce economy. By facilitating smaller, more affordable investment transactions, this initiative could open up new opportunities for small and medium-sized enterprises (SMEs) and entrepreneurs to thrive in the digital marketplace.

As the pilot progresses toward its completion in 2024, the insights gained will be instrumental in shaping future regulatory frameworks and policies regarding digital currencies and financial technologies, ensuring they align with the country’s financial stability and security goals.

The learnings can contribute to the crafting of a comprehensive roadmap for the potential launch of wholesale CBDCs in the Philippines, setting a precedent for future digital currency initiatives. Success in the wholesale domain may eventually lead to exploring retail CBDCs, directly impacting consumers by providing a digital alternative to cash with the backing of the central bank.

While it is still in its pilot phase, e-commerce stakeholders in the Philippines have a unique opportunity to prepare and position themselves to capitalize on the potential changes and benefits that a wholesale Central Bank Digital Currency (CBDC) could bring.

Regularly monitor developments related to Project Agila and the BSP’s announcements. Understanding the technology, timeline, and potential regulatory changes will be crucial. Ensure that your team understands CBDCs, blockchain technology, and specifically, how Hyperledger Fabric operates. This knowledge will be crucial for integrating new payment systems into your operations.

Evaluate your current payment processing and financial infrastructure to identify potential areas for improvement or necessary upgrades to support CBDC transactions. Even though it uses Hyperledger Fabric for a wholesale CBDC, exploring blockchain solutions and understanding their integration with existing systems could provide a competitive edge.

Consider various scenarios on how the introduction of a CBDC could impact your business operations, customer interactions, and competitive landscape. Think about new financial products or services that could be possible with CBDCs, such as more efficient loyalty programs, microtransactions, or tokenized assets.

Establish or strengthen relationships with banks and financial institutions participating in the pilot. These connections can offer insights and early access to CBDCrelated services. Identify and collaborate with financial technology providers who are experienced with blockchain and CBDCs to prepare for technical integration and innovation.

Start educating your customers about the potential benefits and changes that CBDCs might bring to their shopping experience. This can help manage expectations and build trust. Implement systems to gather customer feedback on digital payments and potential CBDC transactions. Understanding your customers’ concerns and preferences will be valuable for tailoring your services post-CBDC implementation.

Keep an eye on regulatory guidance and frameworks being developed around CBDCs. Engage in industry discussions and consultations about CBDC implementation. Your input can help shape policies that are conducive to a thriving e-commerce ecosystem. Look for opportunities to participate in CBDC pilot projects or partnerships with financial institutions. Early experimentation can provide valuable learning and a competitive advantage.

By taking these proactive steps, e-commerce stakeholders cannot only prepare for the potential wide-scale rollout of a CBDC but also position themselves as leaders in a new, digitally enhanced market environment.