Unchained by CADENA: How a blockchain system could relieve the banking sector of corruption woes

By Matthew Miguel L. Castillo, Researcher

TUNING IN to local news in the late months of 2025 would have had you skimming through scoops on the exposed corruption mess of flood control funds.

The previous BusinessWorld quarterly banking report showed a finer strike the mess had dealt, revealing a dip in the Philippine banking sector’s performances in total assets and total loans.

The Bangko Sentral ng Pilipinas (BSP) said in an e-mail interview that the scenario showed how disruptions in public infrastructure projects could strain contractors and businesses with bank loans — jeopardizing loan repayment performance as a result.

Pointing fingers flew, and accusatory bombs landed, hearing after hearing, as public outrage continued to escalate in the streets and social media alike.

Amid the chaos and frustration over the lack of developments on the chase came the demand for changes in the system plagued by loopholes exploited by thieves whose trails could not be traced.

A proposed fix to the problem was raised last November as Senator Bam Aquino filed Senate Bill 1506 — the Citizens Access and Disclosure of Expenditures for National Accountability (CADENA) Act, to boost transparency, accountability, and good governance of the state’s handling of public funds.

In December, the bill pushed through its third and final reading in the senate; its counterpart in the House of Representatives (House Bill No. 6761) stays pending at the committee level.

If enacted, the potential law will provide CADENA as a publicly accessible portal to all public budget data required under it.

The portal’s namesake, cadena — Filipino for “chain” — is a sly nod to the blockchain system underpinning its rollout.

TRIED AND TESTED
Henry R. Aguda, secretary of the Department of Information and Communications Technology (DICT), compared a blockchain’s function to that of a series of ledgers that keeps track of transactions.

“Every blockchain is, at its simplest, a ledger. And every ledger is, at its simplest, a story,” he said in his 2021 book entitled Opening the Archipelago: The Story of Blockchain in the Philippines authored with Cathy Bautista Casas and Nathan J. Marasigan.

Paul Soliman, cofounder and chief executive officer of BayaniChain, Inc. (BYC), said in a Viber message that CADENA will allow auditors, regulators, and the public “to confirm that a document [of a transaction] or event exists, has not been altered, and has occurred at a specific time.”

He established BYC after seeing that trust issues surrounding audit trails, document integrity, and reconciliation could be solved through the technical provisions of blockchain ledgers.

Mr. Soliman, who has studied and applied blockchain technology since 2016, reviewed and refined the bill in its second reading as a selected member of a convened technical working group.

The central bank said that the recent corruption scandal highlighted the needs of “transparency in company ownership, strong transaction monitoring, and better information systems,” which could be solved by CADENA.

“Blockchain introduces a new paradigm: a shared, immutable ledger where records cannot be altered without leaving a trace,” said Mr. Soliman.

DATA CHAINMAIL
Mr. Aguda explains in his 2021 book that the blockchain system works through a cycle of matching and verifying data blocks through unique cryptographic signatures.

These signatures, called hashes, are spread across multiple “nodes of the network” — allowing independent checking in different sources for a claim to be unanimously confirmed as true.

Mr. Soliman added that documents and fiscal events could be assigned their own hashes placed on a blockchain ledger, changing how they could be trusted and checked.

This achieves three things: transparency, immutability, and veracity.

He said that the provision of transparency would allow independent verification without exposing sensitive information.

Immutability, on the other hand, would be given to documents by denying verification of an altered document with a mismatched hash.

While veracity may be improved by ensuring data integrity through mathematical means of verifying each hash on top of classic institutional assurance.

“[This] creates a verifiable audit layer above government systems […] strengthening trust in how public funds are tracked and reported,” Mr. Soliman said.

Mr. Aguda’s book supports this, saying that each hash is “inextricably linked to all that came before and after it, allowing for one to trace a way back to the genesis — the very first block — from any point in the chain.”

POTENT LINKAGE
The BSP said that universal and commercial banks (U/KBs) face exposure to public project dependencies, stress scenarios involving project suspensions and regulatory disruptions which they must regularly assess in operations.

Section 4 of the bill says that its coverage extends to public-private partnerships (PPP) involved in utilizing, disbursing, and accounting for public funds through national government agencies.

This shows that CADENA brings the promise of helping to monitor and flag rising anomalies among private companies connected with government projects that hold funds in banks.

In simpler terms, the bill’s provisions could render U/KBs as its passive beneficiaries — preventing them from facing shocks rooted in PPP corruption.

“From a financial stability and anti-money-laundering and combating the financing of terrorism (AML/CTF) standpoint, CADENA could help reduce opportunities for misuse of public funds before such risks reach the financial system,” the BSP said.

However, Mr. Soliman said that banks could also play a critical role in the potential law’s implementation.

He said that banks could “integrate their settlement records with blockchain verification layers for stronger auditability,” being at the “intersection of financial transactions and institutional trust.”

He added that this would entail banks providing transaction validation data on government financial flows and participating in verification nodes in the network government finance framework.

“Private entities […] could contribute independent attestations, validation checkpoints, or monitoring analytics that enhance oversight and public confidence,” he added, saying that  blockchain systems support “multi-stakeholder validation models.”

“This would create stronger alignment between fiscal records and financial settlement systems,” said Mr. Soliman.

In line with this, the BSP said that U/KBs could proactively improve data quality and “enhance AML/CTF safeguards” to face corruption shocks.

“The [flood control mess] also underscored the need to continually strengthen training and internal controls for branch frontliners to ensure the timely identification, escalation, and reporting of unusual transactions,” the central bank said.

BINDING ELEMENTS
Mr. Soliman said that implementation of CADENA would go through a “phased rollout approach.”

The pilot stage would be operational at around six to 12 months from its enactment, focusing on establishing the internal integrity of the system.

“This stage validates the technical architecture, governance model, and verification mechanisms,” he said.

However, he added that full nationwide implementation would take longer as it would entail coordinated integration among government systems, financial institutions, and regulatory frameworks.

The bill states that full government implementation is expected to take place around three years after it takes effect.

All government entities will be mandated to record and publish to CADENA all data from documents on the National Government budget.

The government agencies involved in its proposed process of disclosing public budget data and their respective functions are also discussed in the bill.

The DICT will handle a dedicated program management office for CADENA and will serve as the secretariat for the National Budget Transparency and Accountability Council (NBTAC).

The NBTAC will be comprised of members from the Department of Budget and Management, Commission on Audit, the Department of Justice, and the Department of Finance.

It will be responsible for monitoring, maintaining, and implementing the law — ensuring its promised provisions are delivered and outlined purposes fulfilled.

Considering this model, Mr. Soliman said that the main challenges facing the potential law’s effectiveness in the current set-up are institutional rather than technological.

He first cited system interoperability as a possible obstacle, as “government agencies operate different legacy systems.”

Digital governance frameworks also need improvement, as execution will need clearer standards on data ownership, validation, and disclosure.

Furthermore, he said that technical teams and policy stakeholders would need to build their capacities in handling distributed systems.

Lastly, he said that regulatory clarity must also be put in mind as findings and records in the system “must align with legal frameworks for audit and compliance.”

For Mr. Soliman, the daunting scope and challenges of CADENA can be managed with coordinated policy and technical planning.

DOWN THE LINE OF SUCCESS
Mr. Soliman said that the CADENA Act will face the reality of expansion if it passes into law nationwide.

He said that the proposed system would need to be incapacitated and carefully designed in several areas to handle this.

First, he mentioned that the governance of the network must be carefully defined to clarify those responsible for operating validation of nodes and decision making.

He also highlighted the importance of having data disclosure boundaries to ensure transparency without compromising sensitive fiscal information.

Furthermore, he also said that integration standards must be set to make sure different systems in government and finance could interact with the blockchain layer.

And lastly, he added that operational resistance must be strengthened to maintain redundancy and disaster recovery across the network.

“These considerations are not weaknesses [in the system] but part of responsible system design when building national-scale digital infrastructure,” he said.