Friday, March 31, 2023

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Turkey is completing its first test of a central bank digital currency and will continue in 2023

The Central Bank of Turkey, the CBRT, has completed its first test of the Central Bank Digital Currency (CBDC), or what is known as the “Turkish Digital Lira”.

Turkey embraces the central bank digital currency in 2023

The Central Bank of the Republic of Turkey (CBRT) has completed the first central bank digital currency, the Digital Turkish Lira. According to a statement from the central bank on December 29, the central bank authority has successfully completed “first payment transactions” using the digital lira.

The Central Bank of Turkey said it will continue to conduct restricted closed-circuit beta testing with technology operators in the first quarter of 2023. Upon completion of this phase, the Central Bank of Turkey will expand the program to selected banks, and financial, and technology companies for the remainder of the year.

Before explaining the additional stages of the research, which would further enhance participation, it was claimed that the conclusions of these evaluations would be made public by way of a “comprehensive evaluation report”.

Studies on the legal dimension of the digital Turkish lira have shown that digital identification is of vital importance to the project. Therefore, priority will be given to studies related to the technological requirements and the economic and legal framework of the digital lira throughout 2023.

Central bank digital currencies

CBDCs are digital assets backed by a central bank and are notably distinct from cryptocurrencies such as Bitcoin and Ethereum. This is because a central authority, such as the government or the central bank, controls them.

Bitcoin and many other digital assets are decentralized: no single entity controls them, and their transaction books are maintained and validated by a distributed network of validators.

CBDC roadmap so far

In September 2021, the Central Bank of Turkey revealed a study project called “Central Bank Digital Turkish Lira Research and Development” that it was studying the benefits of introducing the digital Turkish lira.

The Turkish government at that time did not commit to the eventual digitization of the country’s currency. In addition, the Turkish government stated that “no final decision has been taken regarding the issuance of the digital Turkish lira.”

The central bank stated in its latest statement that the bank will continue to explore the use of distributed ledger technology in payment systems, and “integrate” it into instant payment systems.

In addition, the country’s central bank emphasized research into the legal aspects of the digital Turkish lira, including the “economic” and “legal framework” surrounding digital identity, in addition to its technological requirements.

Last October, Turkey’s Presidential Directorate for Strategy and Budget presented an annual program for 2023 that included consideration of a central bank digital currency linked to digital identity. According to reports, the Central Bank of Turkey will supervise the payment system.

Turkey’s currency is one of the worst-performing emerging market currencies, having lost 29% of its value this year, which makes it an interesting case study. As a result, individuals in the country are interested in the market for digital assets such as Bitcoin.

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