What is the progress of Taiwan’s CBDC?
In recent years, countries around the world have been studying the possibility of central bank digital currencies (CBDCs). Japan, the Eurozone, and the UK are still in the conceptual verification or prototype construction stage, while China and Thailand have already entered the pilot stage. The Central Bank of Taiwan has also been studying the possibility of a “digital New Taiwan Dollar” since 2019 and is currently in the prototype construction stage.
Today, Central Bank Governor Yang Chin-long went to the Legislative Yuan’s Finance Committee to give a special report and answer questions on the planning of digital currency issuance and the digital transformation of currency.
CBDC Architecture Planning
In response to the evolution of digital technology, the Central Bank of Taiwan has started promoting the digital transformation of currency and conducting research and experiments on CBDC, hoping that the issuance of CBDC can play a role in stabilizing currency and finance.
According to a written report by the central bank, Taiwan has already built a prototype platform for CBDC, which can issue digital cash in the future for everyday use by the public.
Currently, the CBDC prototype platform has various functions, including the issuance, circulation, transfer, payment, tax payment, shopping deduction, conversion, and redemption between cash/bank deposits/CBDC, automatic transfer (automatically transferring to bank deposit accounts when exceeding wallet-set limits), and automatic recharge (automatically transferring from bank deposit accounts to CBDC wallets when the balance is insufficient).
To ensure the stability of financial intermediation, the platform adopts a dual-layer architecture, where the central bank issues and distributes CBDC to intermediaries (such as banks and electronic payment institutions), and then the intermediaries provide CBDC to users. In addition, to prevent people from converting large amounts of deposits into CBDC, interest will not be calculated in the initial stage of issuance.
Based on risk management considerations and the convenience of public use, CBDC wallets will be divided into “anonymous” and “named” wallets. Users can choose to open either type, with the main difference being the “maximum usage limit”.
The transaction and holding amounts in the wallets on the platform will have limits, and intermediaries can set their own limits based on risk considerations. The maximum limit for anonymous wallets will be lower than that for named wallets.
If users choose a named wallet, they need to go through real-name registration (KYC) by the intermediaries. The intermediaries are responsible for properly storing and managing user personal information in accordance with current regulations on data privacy protection. The central bank processes related transactions using de-identification technology and does not retain user details.
Next Steps for CBDC Issuance
The central bank is currently working on three main directions: extensive communication, platform technology improvement, and legal framework deliberation.
External questionnaire surveys have been completed in April this year, and subsequently, public hearings, briefings, and forums will be held from 2025 to facilitate more extensive and specific exchanges, and to enhance the promotion and public awareness of CBDC. At the same time, relevant legal information from major countries is being collected, and the relevant laws and regulations that Taiwan may need to formulate or revise for future CBDC issuance are being reviewed, including the legal basis for CBDC issuance, anti-money laundering measures, information security, and privacy protection.
In addition, considering the digital divide, the central bank is currently conducting relevant experiments to enable offline card payments for people who do not use mobile phones, allowing them to choose between using a phone or card for offline payments even without an internet connection.
Although there is currently no timetable for the issuance of CBDC, the central bank is continuously researching and experimenting, improving the processing efficiency and innovative applications of the payment system. For example, the developed CBDC prototype platform for retail payments can support digital voucher transactions, and the number of transactions per second (TPS) has increased to 20,000.
Currently, Visa, a common global payment network in traditional finance, can execute over 65,000 transactions per second.
The promotion of CBDC is a huge and complex undertaking that requires long-term and phased implementation. The central bank also emphasizes that CBDC is not a “winner-takes-all” international competition. The development in countries that have already issued CBDC or conducted trials is not as expected.