The first experimentation with the digital Turkish Lira has been successful, with Central Bank of Turkey (TCMB) officials expressing great satisfaction with the results of the test.
Clearly, the tests involved payments using the digital lira, and while the first test seems to have been successful, more will follow until at least the first quarter of 2023, the results will be shared with the public through final evaluation reports.
The Central Bank’s ambitious Turkish lira project
The first payment transactions on Turkey’s digital network have been successfully executed; testing will continue.
In the press release issued, the Central Bank of Turkey explained:
“The CBRT will expand the platform to enable implementation with digital Turkish Lira to involve selected banks and financial technology companies, and will unveil the advanced stages of the pilot study that will enable further expansion of participation.”
In the next quarter of 2023, the Central Bank of Turkey’s intention is to involve banks and financial companies, expanding participation. Testing will continue with more advanced phases, with configurations in specific areas such as the use of accounting technologies in payment systems and integration to instant payment methods.
Digital identification is central to the project, so testing the economic and legal framework for the Turkish digital currency will be the priority in 2023.
Inflation has been one of the biggest problems for Turkey’s economy. President Erdogan and the Turkish people are waiting for inflation to begin to fall as the US dollar continues to rise higher and higher against the Turkish lira.
Considering the growing risks regarding global demand, the committee assessed that the current benchmark rate is appropriate and therefore ended the cycle of rate cuts that began in August.
The bank’s statements are based on the latest inflation data for November, which in trend terms showed prices falling from 85.5% in October to 84.39% in early 2023.
It is not only Turkey that aims to digitize its currency
Given the popularity in recent years of Bitcoin and other cryptocurrencies, it was very predictable that central banks of all countries around the world began to study the concept of digital currencies.
According to the Bank of International Settlements (BIS), 80% of banks around the world are considering or already planning to research and develop their currencies into digital versions, with 40% already in the testing phase.
The Japanese Central Bank for example, will begin testing the digital yen in spring 2023, involving consumers and businesses in the private sector. At the moment, the Japanese Central Bank (BoJ) is in a basic-functionality testing phase; the Asian nation is not yet ready for the actual experimental phase.
The project is ambitious and appears to be very similar to China’s, the difference being that China’s digital currency does not make use of blockchain, while the one being planned by Japan should. The governor of the Japanese Central Bank, however, has specified that in order to carry out such an operation, he needs national consensus first.
In China, the situation is quite different; there is no longer the experimental phase for the digital currency that has already been launched, but we are in the incremental phase. In fact, the People’s Central Bank of China (PBoC) is trying to increase the widespread adoption of the Digital Yuan. It is doing this through continuous updates on the app with added features, gifts, and invitations. For example, one recently introduced feature is a menu that allows users to exchange cash gifts; within the menu these gifts are represented by “red envelopes,” a typical custom in Chinese culture.
With the aim of eliminating cash, new developments related to digital currencies are also arriving from Africa, specifically Nigeria; indeed, the African nation has launched the eNaira. The digital currency aims to eliminate banknotes and coins in Africa’s most populous country.
There are many public news stories that can be accessed to find out more about the various projects involving countries around the world in the use of digital currencies. The United States, England and Australia have also announced the start of projects related to this.
The same for Kazakhstan, which has already announced the implementation of a digital currency as early as 2023, with gradual integrations over the next 3 years.
Even though the countries of Central America and Europe seem to be treading lightly, carefully considering the choices to be made regarding the issue, emerging countries seem to be jumping decisively into digital state currencies.
The motivations are clear, a digital currency would promote the inclusion of a large part of the population in the financial world. Moreover, cash is slowly disappearing and digital payments are going through private systems, a digital currency would make this transition obsolete.
Experimentation in digital currency is moving forward, the hope is that Europe (or rather the Eurozone countries) will build on this experience and not be too late.