Taiwan's Central Bank Completes Second Stage of CBDC Development Plan

Taiwan's central bank has reportedly completed the second phase of its trials to assess the feasibility of issuing a CBDC, which it plans to make available for retail use.

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The central bank started researching the feasibility of implementing a CBDC in September 2020. The latest trials involved testing the digital currency with select wholesale merchants and banks in a closed loop environment.

The banks involved in the study included CTBC Bank, Cathay United Bank, Hua Nan Commercial Bank, Taishin International Bank and Shanghai Commercial and Savings Bank.

On Wednesday (29 June), central bank president Yang Chin-Long said the second stage of the CBDC development plan was complete.

Yang described the CBDC as a risk-free asset with the potential to fulfill the future financial needs, particularly for young people who are more accustomed to digital payment methods.

The CBDC will be connected to digital wallets, accessible to anyone, and not tied to bank cards. Initially it will not accrue interest when deposited at banks, so as to prevent adverse impacts on bank liquidity and borrowing costs.

The central bank will also impose spending and transaction limits during the early stages of implementation to avoid erratic market fluctuations.

According to Yang, the central bank will now collect feedback on the test and seek to gain public support before promoting the digital currency.

The central bank will also have to work on ensuring the stability of the platform and establishing a legal framework and regulations for the new digital currency, he added.

"This will take a long time, at least two years, and then we'll have to evaluate it again."