Taiwan Central Bank Advances CBDC Research, Emphasizes Cautious Approach

Taiwan’s central bank is making steady progress in its central bank digital currency (CBDC) research, revealing a prototype platform and plans for further testing. However, the bank emphasizes that it is not rushing to launch a CBDC and views the development as a complex, long-term project rather than an international competition.

Central Bank Governor Yang Chin-long recently outlined the bank’s CBDC plans in a report to be presented to the Finance Committee of the Legislative Yuan. While the central bank has not set a specific timeline for CBDC issuance, it continues to refine its prototype and explore potential applications.

The CBDC prototype platform for retail payments has demonstrated impressive capabilities, supporting up to 20,000 transactions per second and enabling digital coupon operations. Additionally, the central bank is developing a proof-of-concept for a wholesale CBDC, which could serve as a liquidation asset for tokenized assets.

Yang revealed that the bank plans to conduct three-scenario tests using a tokenized shared platform:

  1. Inter-bank transfer of bank deposit tokens
  2. Synchronous delivery of asset tokens (DVP)
  3. Special-purpose digital money for government bidding processes

These tests aim to improve efficiency in various financial operations, from inter-bank transfers to streamlining government tender processes using smart contracts.

The central bank’s cautious approach aligns with global trends, as many countries explore CBDC development while considering potential risks and benefits. Yang noted that countries that have already issued or piloted CBDCs have not seen outcomes as positive as initially expected.

Taiwan’s CBDC research, which began in 2019, has already completed two testing phases. The bank is taking a prudent approach, focusing on meeting public digital payment needs and aligning with government digital policy goals.

As part of its ongoing research, the central bank plans to hold multiple hearings and forums next year to engage with the public and stakeholders. This approach demonstrates Taiwan’s commitment to thorough investigation and transparency in its CBDC development process.

While Taiwan advances its CBDC research, it’s worth noting that the country’s broader cryptocurrency landscape remains largely unregulated. However, recent developments, such as the establishment of a crypto industry association and proposed amendments to anti-money laundering laws, indicate a move towards a more structured regulatory environment for digital assets.