Taiwan Develops CBDC Prototype Platform, Plans for 2024

Taiwan has made significant progress in its exploration of a central bank digital currency (CBDC). The central bank, under Governor Chin-Long Yang, has been actively researching and developing a CBDC since 2019. This ongoing effort has now resulted in the creation of a prototype platform, as confirmed by The Block and local news agencies.

Prototype Platform Development: Taiwan’s central bank has developed a prototype CBDC platform that utilizes a two-tier issuance structure. This platform is capable of processing 20,000 transactions per second, showcasing significant advancements in retail CBDC functionality.
Upcoming Hearings and Forums: The central bank plans to hold multiple hearings and forums next year to further discuss and refine the CBDC’s development. These sessions aim to engage stakeholders and the public in the development process, ensuring comprehensive input and feedback.
Governor’s Presentation: Central Bank Governor Chin-Long Yang is set to present a detailed research report on the CBDC’s progress to Taiwan’s Legislative Yuan (parliament) on Wednesday. This presentation will outline the development milestones and future plans for Taiwan’s digital currency initiative.

Technical and Policy Aspects

Non-Interest Bearing: Initially, the CBDC will be non-interest bearing. This approach is intended to minimize the impact on the traditional banking system and ensure a smooth integration with existing financial structures.
Wallet Types: The CBDC wallets may come in both anonymous and registered types, providing flexibility and addressing privacy concerns while ensuring regulatory compliance.
Wholesale CBDC: In addition to the retail focus, the central bank is also exploring the development of a wholesale CBDC. This could potentially be used as a clearing asset for asset tokenization, enhancing the efficiency and security of financial transactions.

Regulatory and Industry Context

Regulatory Framework: The central bank clarified that cryptocurrency and stablecoins are not part of the CBDC research. The focus remains on developing a robust and regulated digital currency system, separate from the largely unregulated crypto sector.
AML Compliance: Taiwan’s financial regulator requires crypto service providers to comply with anti-money laundering (AML) laws. Recently, the Ministry of Justice proposed amendments to existing AML laws to include stricter regulations for both domestic and overseas crypto firms operating in Taiwan.

Industry Collaboration

Industry Association: Last month, Taiwan’s crypto sector established an industry association to formulate self-regulatory rules in line with government guidelines. This initiative aims to foster a safer and more regulated environment for digital assets in Taiwan.

Taiwan’s cautious and methodical approach towards developing a CBDC reflects its commitment to innovation while ensuring financial stability and regulatory compliance. The upcoming hearings and forums are expected to play a crucial role in shaping the future of Taiwan’s digital currency landscape, paving the way for potential issuance and broader adoption in the coming years.