Taiwan has gone as far as to launch CBDC and will further delay the issuance

The Governor of the Central Bank of Taiwan, Yang Chin-long, stated that the development of Central Bank Digital Currencies (CBDCs) is not an international competition, and being the first to launch does not guarantee success.

Currently, most countries that have introduced digital currencies have not achieved significant results.

He revealed that the Central Bank of the Republic of China (Taiwan) will conduct three scenario tests for the digital New Taiwan Dollar.

Although there is no timetable for issuing a CBDC, the bank is continuously improving the processing efficiency and innovative applications of its payment system.

Yang emphasized that the promotion of CBDCs is a long-term project, and the bank will steadily ensure that the future digital transformation of currency will contribute to the development of the national digital economy and digital finance.

This announcement coincides with a global trend where more and more countries (accounting for 98% of the global economy) are researching or advancing their own digital currencies.

Unlike other countries rushing to launch digital currencies, the Central Bank of Taiwan is cautiously and methodically advancing the potential introduction of CBDCs, prioritizing public awareness and education as important prerequisites for the future launch of a CBDC.

Taiwan's Preparation for the Launch of CBDCs

Currently, the CBDC prototype platform is designed for retail payments, capable of processing digital coupon transactions at a speed of 20,000 transactions per second.

Additionally, the bank is exploring a proof of concept for wholesale CBDCs, combining CBDCs with bank deposit tokens to facilitate future digital currency systems.

The Central Bank plans to apply tokenization technology to transform wholesale and commercial bank money, support asset tokens, and collaborate with banks to test interbank transfers and asset token delivery on a common platform. Meanwhile, the Financial Supervisory Commission of Taiwan will propose new digital asset regulations in September 2024, aiming to enhance market supervision and investor protection.

Global Progress of CBDCs

CBDCs are increasingly gaining global attention, with many countries exploring or advancing their digital currency plans.

The Bahamas, Jamaica, and Nigeria have fully launched CBDCs.

Additionally, 53 countries are in the advanced planning stages, and another 46 countries are actively researching the concept.

Significance of Implementing CBDCs

The motivations for adopting CBDCs vary by country/region, typically focusing on goals such as enhancing financial inclusion, improving payment efficiency, and providing sovereign digital currency options.

In regions such as the Middle East and Central Asia, 19 out of 31 countries are exploring CBDCs with the aim of improving cross-border payment efficiency, particularly among oil-exporting countries and Gulf Cooperation Council countries like Bahrain, Saudi Arabia, and the UAE.

Risks and Challenges of CBDCs

Adopting CBDCs requires careful consideration due to potential risks such as bank runs, vulnerability to cyber threats, and complex regulatory challenges related to privacy and anti-money laundering measures.

Policymakers must weigh these risks against the expected benefits to determine whether CBDCs are suitable for their respective economies.

Despite the strong momentum for CBDC adoption and the realization of some anticipated benefits by existing digital payment solutions, concerns about data privacy, security, and uncertainties regarding CBDC adoption rates remain. Ultimately, the evolution of the monetary system will depend on how central banks navigate the complex landscape of CBDC implementation in the coming years.