Taiwan’s Central Bank Forges Ahead with CBDC Plans in ‘Banking 4.0’ Era

Taiwan’s Central Bank is making strides in the realm of Central Bank Digital Currency (CBDC), as Deputy Governor Chu Mei-lie outlined the completion of a technical feasibility study for a wholesale CBDC. The focus now turns to gathering feedback for platform improvement and considering further pilots for a retail or “universal” CBDC. The developments come as part of Taiwan’s ambitious “Banking 4.0” vision, aiming to integrate banking services seamlessly into the daily lives of customers.

The initiative to explore CBDCs gained momentum following concerns about declining cash usage. The objective is to provide secure digital currency access to the public, enhance future payment services, deepen financial inclusion, and improve cross-border payments. However, Deputy Governor Chu has underscored the importance of tokenization, emphasizing the need for the central bank to anchor tokenized deposits and stablecoins in an evolving financial landscape.

The universal CBDC trials have showcased various functionalities, including wallet operations, exchanges, transfers, shopping, and digital coupons. Collaborating with five commercial banks, the CBDC platform currently supports 20,000 transactions per second, a capacity deemed sufficient for Taiwan’s 23 million population. Despite this, efforts are underway to further enhance transaction throughput, along with research into an offline CBDC solution.

Chu’s recent speech also highlighted engagement with the Bank for International Settlements (BIS) and Swift, demonstrating Taiwan’s commitment to aligning its CBDC endeavors with global standards. The focus on tokenization extends beyond digital currency, aligning with the BIS concept of a Unified Ledger. This approach supports tokenized securities, real-world assets, and tokenized deposits, fostering interoperability among systems.

While the central bank moves forward with CBDC plans, challenges persist. Deputy Governor Chu acknowledged concerns about bank disintermediation and the need for interoperability with existing payment systems. The central bank takes a prudent approach to CBDC development, with no predefined timeline for a final decision, prioritizing a thorough understanding of the potential impact.

Taiwan’s Fubon Bank, in collaboration with Ripple and the Hong Kong Monetary Authority, has engaged in a reverse mortgage pilot project using Hong Kong’s e-HKD CBDC. Additionally, successful integration of China’s digital yuan, the e-CNY, into its platform demonstrates Taiwan’s openness to international collaborations in the evolving landscape of digital currencies.

As Taiwan positions itself on the forefront of CBDC exploration, the careful consideration of feedback and ongoing research underscore the commitment to fostering a robust and inclusive financial ecosystem. The “Banking 4.0” vision aligns with global trends, emphasizing the pivotal role of advanced technology in shaping the future of banking services.