Turkey completes phase 1 of digital lira pilot, pledges to push ahead in 2023

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Turkey has become the latest country to announce a successful pilot of a central bank digital currency (CBDC), with its central bank revealing it had conducted its first transactions in the digital lira.

The Central Bank of the Republic of Türkiye (CBRT) announced that it had completed the first phase of the Digital Turkish Lira Project and executed the foremost payment transactions on the network.

Press Release on the Use of Digital Turkish Lira: https://t.co/48ulWfJqXw

— CentralBankofTürkiye (@CentralBank_TR) December 29, 2022

“The CBRT will continue to run the limited, closed-circuit pilot tests with technology stakeholders in the first quarter of 2023. Findings obtained from these tests will be shared with the public via a comprehensive evaluation report,” CBRT stated.

The central bank ramped up its CBDC efforts in 2021, engaging the services of various tech firms, including Tubitak-Bilgem and Havelsan, to research, develop and test the digital lira.

These efforts have come amid the continued devaluation of the Turkish lira. Since the turn of the last decade, the lira has continued to struggle, a downward spiral that was accelerated in 2022. In September, $1 was worth 8 lira, but by December, it had shot up to 19 lira.

The lira’s struggle has continued to push more Turks into digital assets, in line with citizens experiencing similar struggles, including in Venezuela and Zimbabwe. While the CBRT believes that a digital lira can remedy the situation, some, including the leaders of the country’s opposition party, have cautioned that it’s not a panacea for all that ails Turkey.

“Digital currency is exciting, but it is not the deus ex machina that will save the country’s tanking lira,” said Ali Babacan, the founder of DEVA, Turkey’s opposition party.

Despite some skepticism, the CBRT has pledged to continue with its digital lira pilot in 2023.

“In 2023, the CBRT will expand the Digital Turkish Lira Collaboration Platform to involve selected banks and financial technology companies, and will unveil advanced phases of the pilot study that will further widen the participation,” the bank said.

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.

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