Taiwan is keen to catch up with regional leaders China and Hong Kong after completing a Proof-of-Concept (PoC) for its own central bank digital currency (CBDC).
Taiwan’s central bank deputy governor, Mei-lie Chu, confirmed the banking regulator’s latest milestone to attendees at a financial event. Chu reportedly announced the completion of a CBDC study to explore the possibilities of introducing a digital Taiwan New Dollar.
The feasibility study conducted by the central bank focused on wholesale CBDCs, exploring the use of blockchain technology for interbank transfers. In a keynote address, Chu stated that the PoC burrowed into integrating artificial intelligence into banking to improve the present state.
Chu disclosed that the feasibility study yielded positive outcomes for the central bank, including the prospects of streamlining payment systems, improving security, reducing settlement costs, and saving time.
The central bank executive noted that a wholesale CBDC is still far from a final rollout, given several risk factors working against the offering. To address the lingering legal and technical issues, Chu hinted at a public consultation to seek the opinions of commercial banks, blockchain service providers, and the general public on the best path to launch a CBDC offering.
Chu remarked that the central bank will adopt a “slow-and-steady approach” toward development, eyeing a “tailor-made” wholesale CBDC payment system for the Taiwanese economy.
While Taiwan’s attempt at a wholesale CBDC is still in the early stages of its development, a retail iteration has made significant progress. The central bank has completed a pilot project, roping in five leading commercial banks, merchants, and users to stress-test the offering in real-world scenarios.
The central bank spotted vulnerabilities associated with a full-scale launch of a retail CBDC in its 2022 pilot, including the risks of bank disintermediation. Taiwan’s central bank aims to build a resilient CBDC system with use cases in tokenization and cross-border payments.
Taiwan catching up to its neighbors
Taiwan’s latest developments with its CBDC feasibility study are seen as an attempt to close the gap between it and its neighbors. China’s digital yuan pilot, widely considered the most advanced CBDC study, is nearing completion with several features designed to give it an edge over existing payment alternatives.
Meanwhile, Hong Kong has indicated a readiness to mirror China’s CBDC moves, testing several use cases but remains coy over a full rollout. Hong Kong Monetary Authority (HKMA) executives described the first round of pilots as a “remarkable success,” hinting at a focus on full-fledged payments, tokenized assets, and programmable payments.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: CBDCs are more than just digital money
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