Taiwan Central Bank’s Approach to CBDC Development

Main Points:

1. Taiwan is taking a cautious approach to CBDC, emphasizing thorough testing and gradual implementation.
2. Taiwan’s central bank governor, Yang Chin-long, states that CBDC is not a “global competition.”
3. The bank highlights the complexity and long-term nature of CBDC projects.
4. Taiwan aims to enhance digital payment policies while ensuring compliance with local regulations.

Taiwan Central Bank’s Approach to CBDC Development

Overview

On July 7, 2024, Taiwan’s Central Bank Governor, Yang Chin-long, stated that the development of a central bank digital currency (CBDC) is not a matter of international competition. Instead, Taiwan is focusing on a measured and cautious approach to its CBDC, named the digital New Taiwan Dollar. The Central Bank is conducting extensive experiments and plans to advance slowly to ensure comprehensive testing and integration.

Objectives and Strategic Approach

Key Objectives:

1. Data Security and Sovereignty: Ensuring that the CBDC aligns with Taiwanese laws and protects national interests.
2. Comprehensive Testing: The Central Bank emphasizes thorough testing to address potential issues and improve the system’s efficiency.
3. Long-Term Vision: Recognizing the extensive and complex nature of CBDC projects, Taiwan aims to implement a robust digital currency system over time.

Strategic Approach:

1. Non-Competitive Stance: Governor Yang stressed that the CBDC is not about international competition but about ensuring a secure and effective national system.
2. Incremental Implementation: The approach involves careful and gradual progress to integrate the digital New Taiwan Dollar into the existing financial infrastructure.

Challenges and Considerations

Challenges:

1. Technical Complexity: Developing a secure and efficient CBDC involves addressing significant technical challenges.
2. Regulatory Compliance: Ensuring the CBDC complies with local and international regulations is critical.
3. Public Trust and Adoption: Building trust among the public and encouraging widespread adoption will be essential for the CBDC’s success.

Considerations:

1. Stakeholder Collaboration: Working with various stakeholders, including financial institutions and government agencies, to ensure a cohesive approach.
2. International Coordination: While not a competition, coordinating with global standards and practices can enhance the CBDC’s effectiveness.
3. Long-Term Commitment: The Central Bank acknowledges that the project will require sustained effort and resources over many years.

Current Status and Future Plans

Current Status:

• Taiwan’s Central Bank has completed technical feasibility studies for wholesale CBDC.
• Plans for retail or “universal” CBDC pilots are underway.

Future Plans:

• Continued research and development, with ongoing experiments to refine the digital currency system.
• Gradual integration into the national payment infrastructure, ensuring seamless transition and adoption.

Taiwan’s methodical approach to CBDC development highlights its commitment to creating a secure, efficient, and compliant digital currency. By focusing on thorough testing and gradual implementation, Taiwan aims to ensure the digital New Taiwan Dollar meets national needs and regulatory standards. This strategic approach underscores the complexity and long-term nature of CBDC projects, positioning Taiwan for a future where digital payments are integral to the economy.