The first payment transactions in a digital Turkish lira have taken place as part of a central bank digital currency (CBDC) testing programme set to expand in the coming months.
The trial payments were made ‘within the scope of the ‘first phase of the Digital Turkish Lira Project’, the Turkish central bank has announced.
The authority will continue its ‘narrow-scope and closed-loop pilot application tests carried out together with technology stakeholders’ during the first quarter of 2023, the Central Bank of the Republic of Türkiye (TCMB) states in a (Turkish language) press release, adding that findings will be shared publicly with a ‘comprehensive’ evaluation report.
The TCMB, which is based in the G20 member country’s capital Ankara, goes on to state that a ‘Digital Turkish Lira Cooperation Platform’ will be extended during 2023 with the participation of ‘selected’ banks and fintech companies. Its CBDC experimentation will then include pilot tests with ‘wide’ participation.
Plans to launch a ‘blockchain-based’ digital currency within four years were published in 2019 although CBDC research in the country pre-dates that. The central bank’s update states that ‘tests of original architectural fictions designed on issues such as the use of distributed-ledger technologies in payments ecosystems and their integration with instant payment systems will continue’.
Digital ID ‘critically important’
The central bank states that studies on the legal dimension of the digital Turkish lira show that digital identification is of ‘critical importance’ for the project.
‘For this reason, throughout 2023, priority will be given to studies on the technological requirements of the digital Turkish lira as well as its economic and legal framework,’ the TCMB explains.
The 2023 Presidential Annual Programme (Turkish language), published by the Presidency Strategy and Budget directorate (Cumhurbaşkanlığı Strateji ve Bütçe Başkanlığı) in October 2022, included mention of CBDC. It stated that integration of a central bank digital Turkish lira (‘Merkez Bankası Dijital Türk Lirası’) with ‘identity’ and central bank-operated instant payment system FAST ‘within the scope of research and development studies will be completed’. The 391-page document’s brief CBDC section also stated that research with banks would take place focused on wholesale CBDC, retail CBDC’s lower-profile sibling.
With a GDP of about $720 billion (about £592bn), Turkey is the 19th-largest economy in the world, according to the World Bank. The country, whose government last year launched a campaign to change the country’s name internationally to Türkiye, has a population of about 84 million people. A general election is due to take place this year.
The country is the largest market for cryptocurrency in the ‘MENA’ (Middle East and North Africa) region, and the 12th largest market in the world for crypto adoption, according to the ‘Chainalysis 2022 Geography of Cryptocurrency Report’, which was published in October 2022. ‘In Turkey and Egypt, fluctuating cryptocurrency prices have coincided with rapid fiat currency de-valuations, strengthening the appeal of crypto for savings preservation,’ the report notes, pointing out that the Turkish lira inflated by 80.5 per cent in the last year.
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