Plans to develop a central bank digital currency are to go ahead, with the possibility that it might one day replace cash, central bank Governor Yang Chin-long (楊金龍) said yesterday, adding that the process would not interfere with the bank’s core roles of maintaining financial stability and supporting the economy.
Taiwan is in phase 2 of developing its own digital currency, which is the process of certification and conducting trial runs, after wrapping up a feasibility study in June last year, Yang told a forum in Taipei on the development of digital currencies and the future of Taiwan’s financial industry.
“Doing it right is more important than doing it fast,” the governor said, echoing comments by US Federal Reserve Chairman Jerome Powell.
Photo courtesy of the central bank
Introducing a digital currency should not be a competition in which early adopters have an advantage, Yang said, adding that at stake are privacy, and a nation’s financial stability and economic activity.
There are four phases for a central bank to develop a digital currency, with the third to involve pilot operations at some venues before a full-scale launch, he said.
A digital currency would need the support and participation of government agencies, the public, financial institutions, academics and infrastructure providers, he said.
Stable and mature technology is required to maintain sturdy operations, he added.
Moreover, it must have a legal basis for its use, including privacy protection, and guards against money laundering, cyberterrorism and other crimes so it can win trust, Yang said.
Taiwan would take cues from Europe and the US, where plans are in place to have government-run digital currencies coexist with cash, credit cards and electronic payment tools, he said, adding that digitalization is reshaping the world.
However, cash remains a popular payment vehicle, being used for more than NT$2 trillion (US$71.17 billion) of retail transactions last year, he said.
The central bank would stand firm in its role as the “lender of last resort” through its money market operations, allowing it to remain in regulatory control even in a post-cash era, he said.
Countries such as the Bahamas and members of the Organisation of Eastern Caribbean States have introduced digital currencies, mainly because electronic payment tools are not commonplace and the cost of printing notes is too high, Yang said.
China, which is in phase 3 of developing a digital currency, has not set a timetable for an official launch amid concerns the rollout might challenge its existing monetary system, he said.
China is eyeing a digital currency to help break up monopolies in its payments market, he said.
Yang said that his organization has to make sure that its currency would not affect its missions, including the regulation of bank reserves, which are the source of credit creation.
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