What is the current progress of Taiwan’s CBDC?
In recent years, countries around the world have been studying the possibility of central bank digital currencies (CBDCs). Japan, the Eurozone, and the UK are currently in the conceptual verification or prototype construction stage, while China and Thailand have already entered the pilot stage. The Central Bank of Taiwan has also been studying the possibility of “Digital New Taiwan Dollar” since 2019 and is currently in the prototype construction stage.
Today, Central Bank Governor Yang Chin-long went to the Finance Committee of the Legislative Yuan to give a special report and answer questions on the topic of “Planning for the issuance of digital currency and the digital transformation of money”.
CBDC Architecture Planning
In response to the evolution of digital technology, the Central Bank of Taiwan has started promoting the digital transformation of money and conducting research and experiments on CBDC, hoping that the issuance of CBDC can play a stable role in currency and finance.
According to the written report of the central bank, Taiwan has already built a CBDC prototype platform, which can issue digital cash in the future for daily public use.
The current CBDC prototype platform already has various functions such as the issuance, circulation, transfer, payment, tax payment, shopping deduction, exchange, and redemption between cash/bank deposits/CBDC, automatic transfer (automatically transferring to bank deposit accounts when exceeding the limit set in the wallet), and automatic top-up (automatically transferring from bank deposit accounts to CBDC wallets when the balance is insufficient).
To ensure that the financial intermediary functions are not affected, the platform adopts a two-tiered architecture, with the central bank issuing and distributing CBDC to intermediaries (such as banks and electronic payment institutions), who then provide CBDC to users. In addition, to prevent people from converting large amounts of deposits into CBDC, there will be no interest calculation during the initial issuance.
Based on risk management considerations and the convenience of public use, the CBDC wallet will be divided into “anonymous” and “named” wallets. Users can choose to open a named or anonymous wallet, and the biggest difference between the two lies in the “maximum usage limit”.
The transaction and holding amounts in the wallet on the platform will be subject to limits, and intermediaries can set their own limits based on their risk considerations. The maximum limit for anonymous wallets will be lower than that of named wallets.
If users choose a named wallet, they need to go through real-name registration (KYC) by the intermediary institution and properly store and manage users’ personal information in accordance with the current regulations on data privacy protection. The central bank will process relevant transactions using de-identification technology and will not retain user details.
The Next Steps for CBDC Issuance
The central bank is currently promoting CBDC in three main directions: extensive communication, platform technology improvement, and legal framework deliberation.
The outsourced questionnaire survey has been completed in April this year, and subsequent public hearings, briefings, and forums will be held starting from 2025 to engage in more extensive and concrete exchanges and enhance the promotion and public awareness of CBDC. At the same time, the central bank continues to collect relevant legal information from major countries and take stock of the related laws and regulations that Taiwan may need to establish or amend in the future for the issuance of CBDC, including the legal basis for issuing CBDC, anti-money laundering measures, information security, and privacy protection.
In addition, considering the digital divide, the central bank is currently conducting related experiments to allow people who do not use mobile phones to use cards for offline payments. This will enable the public to choose to make offline payments using either mobile phones or cards even without an internet connection.
Although there is currently no timetable for the issuance of CBDC, the central bank is continuously researching and experimenting to improve the efficiency and innovative applications of the payment system. For example, the developed CBDC prototype platform for retail payments already supports the financial operations of digital vouchers, and the number of transactions per second (TPS) has been increased to 20,000.
Currently, Visa, a common global payment network in traditional finance, can process over 65,000 transactions per second.
The promotion of CBDC is a huge and complex project that requires long-term and phased promotion. The central bank also emphasizes that CBDC is not a “winner-takes-all” international competition, and the development of countries that have already issued CBDC or conducted pilots has not met expectations.