While some countries are in a hot race to develop central bank digital currencies (CBDCs), Taiwan’s central bank governor, Yang Jinlong, is advocating a more cautious approach.

In a report by local news agency UDC released ahead of the July 10 parliamentary session, Yang stressed that prioritizing the release was not the primary goal. He pointed out that some countries with CBDC pilots have not yet seen the expected benefits.

Despite the cautious approach, the central bank is actively exploring the potential of a digital New Taiwan dollar. Yang revealed plans for three experimental scenarios: interbank transfers using tokenized deposits, simultaneous delivery of digital assets, and special-purpose digital money.

The central bank is also developing a prototype platform for retail CBDC transactions. The platform can reportedly handle 20,000 transactions per second and is already being tested for digital coupon programs, Yang said.

While there is no set timeline for the release, Yang highlighted that ongoing research and development is already contributing to advances in domestic payment efficiency and innovation. Unlike some countries that are aggressively seeking first-mover advantage, Taiwan’s primary focus appears to be on aligning the practical applications of CBDC with its broader digitalization goals.

This focus extends beyond just CBDC. In March, the Financial Supervisory Commission announced that it would propose a new draft of digital asset regulations for Taiwan in September 2024. These regulations aim to create a more efficient framework for digital asset markets, prioritizing investor protection and fostering a responsible environment for innovation. Digital currency space.

Yang’s plans show that Taiwan, with its existing strong payment infrastructure, is taking a measured approach to CBDC development, prioritizing long-term benefits over quick launches.

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The global rush for CBDCs

This frenzy for innovation is driven by several factors. First, CBDCs hold the promise of revolutionizing financial transactions. It aims for near-instant settlement, seamless cross-border payments, and potentially even lower transaction costs. This newfound efficiency could pave the way for entirely new financial products and services, further stimulating the financial landscape.

However, the motivations behind CBDC development go beyond pure economic efficiency. Financial inclusion is another key driver. In many countries, a large segment of the population is unbanked, lacking access to traditional financial services. CBDCs, with their potential for wider reach, can fill this gap and bring these individuals into the fold of the formal financial system.

Finally, central banks are well aware of the rise of private cryptocurrencies like Bitcoin. These decentralized digital currencies are a potential challenge to the traditional role of central banks in managing monetary policy. By issuing their own digital currencies, central banks hope to maintain control over the flow of money in the digital age, ensuring financial stability and protecting their ability to operate the economy.

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