BSP studying 3 key market infra technologies

THE Bangko Sentral ng Pilipinas (BSP) is exploring three new technologies that will be crucial to the development of new financial market infrastructure (FMI), making the Philippines one of the more open jurisdictions in the region to new financial tools, the Asian Development Bank (ADB) said.

The ADB said the BSP is currently developing proofs of concept for artificial intelligence, open API (application programming interface), and cloud computing, three of the six technologies it identified as instrumental to the FMI of the future.

The  other three tools for the development of new FMI are distributed ledger technology (DLT), big data analytics, and cybersecurity.

The ADB said that according to a survey it conducted, five central banks in the ASEAN + 3 region have explored a single new technology; three have explored two; six have explored three; and two have explored four.

“Twenty of the 25 Cross-Border Settlement Infrastructure Forum (CSIF) member institutions responded to the survey in 2021. Sixteen of the 20 institutions stated that they have explored at least one of the six new technologies” ADB Financial Sector Specialist Byung Wook Ahn said in a webinar on Thursday.

“All central banks and central securities depositories (CSDs) in this region… really need to consider those emerging technologies. Regardless, if they only focus on one path or many, this is really the fact. The more important thing (is that) I realized, many of our CSIF members are already developing a proof of concept or already in the production level,” ADB advisor Satoru Yamadera said in the webinar.  

The Philippine CSD — the Bureau of the Treasury (BTr) — is deemed to be in the production stage in terms of cybersecurity and is developing a pilot case for DLT, also known as blockchain.

“The BSP has been exploring engagements with potential providers of blockchain analyzer solutions that could facilitate, among others, surveillance of supervised financial institutions utilizing cryptocurrency and blockchain technology in their businesses (i.e., virtual asset service providers)” the ADB said in its report detailing the outcome of the survey.

Recently, the BSP announced a pilot project that will test the use of a wholesale central bank digital currency (CBDC) for large-value financial transactions involving selected financial institutions.

This project will experiment with CBDC to move large-value transactions round the clock to advance the understanding of risks and opportunities involved in wholesale CBDCs.

The BSP and the State Bank of Vietnam (SBV) are the only institutions that have application cases in cloud computing, the ADB noted.

“These findings appear to mirror the challenges inherent in cloud adoption such as security and compliance concerns, efficient cloud spending, and cloud adoption and data transfer,” the report added.

The ADB found the BSP to be venturing into a “unified regulatory and supervisory technology end-to-end solution to streamline and automate regulatory supervision, reporting, and compliance assessment of cybersecurity risk management of BSP-supervised financial institutions.”

The BSP’s open finance framework was classified as having reached proof of concept stage and is working towards open API standardization.

The ADB said cybersecurity threats remain despite the pursuit of new infrastructure.

“Unfortunately, there is no easy solution. We simply need to create more awareness and understanding. There may be some areas where we can analyze (human) behavior (to facilitate the blocking of) these intrusions. But again, this is not easy. Central banks and CSDs particularly, since we need more investment in the deep critical market infrastructure,” Mr. Yamadera said. — Ana Olivia A. Tirona