Taiwan’s Central Bank continues to explore the possibility of launching a central bank digital currency (CBDC).
Taiwan’s Central Bank Governor Yang Chin-long announced the start of the second phase of CBDC testing. Local news agency Bnext reports this. One of the main points to be examined during testing is the possibility of accruing interest on deposits in the CBDC.
According to the Central Bank’s management, the digital currency should not earn interest. “Neither of the current CBDCs in circulation, such as the Sand Dollar and the digital yuan (e-CNY), accrue interest on deposits,” says Yang Chin-long. The official explains that the option to receive interest could lead to a reduction in deposits in fiat currencies, provoking bank liquidity problems and a market collapse.
In addition, the Taiwanese CBDC faces a number of other challenges:
- the ability to operate even with no Internet access;
- ensuring faster processing speed of transactions compared to bank transfers;
- realizing ample scalability.
The digital currency pilot project has been under development by the Central Bank of Taiwan for the past two years. The bank has not yet given a concrete launch date. However, commenting for Reuters, Yang Chin-long mentioned that solving the current problems could “take a long time, at least two years.” At the same time, the official notes the growing demand for digital payment systems on the island.
Recall that Mainland China’s digital yuan project is gaining momentum and is already being actively integrated into the country’s financial sector. According to the People’s Bank of China, in 2021, about 261 million e-CNY wallets were opened, and ~$14 billion worth of transactions were performed, and in April 2022, over 100 million more users had access to the digital yuan.
