While some countries are in a heated race to develop central bank digital currencies (CBDCs), Taiwan’s Central Bank Governor, Yang Jinlong, is advocating for a more cautious approach.
In a report by local news outlet UDC released ahead of a parliamentary meeting on July 10, Yang emphasized that prioritizing issuance isn’t the main goal. He pointed out that some countries with CBDC pilots haven’t seen the expected benefits yet.
Despite the cautious approach, the Central Bank is actively exploring the potential of a digital New Taiwan Dollar. Yang revealed plans for three experimental scenarios: interbank transfers using tokenized deposits, simultaneous delivery of digital assets, and special purpose digital money.
The Central Bank is also developing a prototype platform for retail CBDC transactions. This platform can reportedly handle 20,000 transactions per second and is already being tested for digital coupon programs, Yang said.
While there’s no set timeline for issuance, Yang highlighted that the ongoing research and development are already contributing to advancements in domestic payment efficiency and innovation. Unlike some countries desperately seeking a first-mover advantage, Taiwan’s primary focus appears to be on ensuring the practical applications of a CBDC align with its broader digitalization goals.
This focus extends beyond just the CBDC itself. In March, The Financial Supervisory Commission announced that it would propose a new draft of digital asset regulations for Taiwan in September 2024. These regulations aim to create a more effective framework for digital asset markets, prioritizing investor safety and fostering a responsible environment for innovation in the digital currency space.
Yang’s plans suggests that Taiwan, with its existing robust payment infrastructure, is taking a measured approach to CBDC development, prioritizing long-term benefits over a quick launch.
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Global Rush for CBDCs
This scramble for innovation is driven by several factors. Firstly, CBDCs hold the promise of revolutionizing financial transactions. The goal is for near-instantaneous settlements, streamlined cross-border payments, and potentially even lower transaction costs. This newfound efficiency could pave the way for entirely new financial products and services, fostering a more dynamic financial landscape.
However, the motivations behind CBDC development extend beyond pure economic efficiency. Financial inclusion is another key driver. In many countries, a significant portion of the population remains unbanked, lacking access to traditional financial services. CBDCs, with their potential for wider accessibility, could bridge this gap and bring these individuals into the fold of the formal financial system.
Finally, central banks are keenly aware of the rise of private cryptocurrencies like Bitcoin. These decentralized digital currencies pose a potential challenge to the traditional role of central banks in managing monetary policy. By issuing their own digital currencies, central banks hope to maintain control over the flow of money in the digital age, ensuring financial stability and safeguarding their ability to steer the economy.
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