In a recent speech, Governor Yang of the Central Bank of the Republic of China (Taiwan) said the central bank was considering both a retail and wholesale central bank digital currency (CBDC). It completed its latest retail CBDC trial three months early.
As with many other parts of the world, digitalization is a key driver of Taiwan’s CBDC research. In 2017 electronic payments accounted for 40% of transactions compared to 60% in the first quarter of this year. This decline in cash usage means giving the public access to a secure and cost-effective digital currency will be important. There may also be concerns about the power of private monopolies controlling the key retail payment system.
The bank completed its first research project in June 2020, a technical feasibility study using decentralized technology for wholesale CBDC. It wasn’t satisifed with the operational efficiency of blockchain technology at that stage. The second phase was a “Universal CBDC Pilot Program” to trial the retail payment scenario with the help of five banks, China Trust, Huanan, Shanghai, Cathay United World Bank and Taishin. Although it was expected to end this September, it was completed three months early.
Regarding the next steps, the bank is considering both a retail and wholesale CBDC. Following phase two, the bank plans to conduct surveys to get feedback on the topic and communicate with the public about CBDCs. Additionally, it intends to refine the design and adopt more mature technologies while formulating a strong legal framework. However, the central bank is yet to announce a final decision to proceed with a CBDC or a specific timetable.
The main motivations for CBDC mentioned in the speech were to provide public access to secure digital currency, meet the needs of future payment services, deepen financial inclusion, and improve cross-border payments. In addition, Taiwan wants to ensure that a CBDC can offer advantages over other forms of electronic payment.