Any signs of digital NT dollar? Taiwan's central bank is set to release an evaluation report, leaning towards dual-track parallel development, with a trial phase expected in the second half of the year.

With the increasing popularity of mobile payments, the demand for cash transactions has been decreasing year by year. China has already initiated a pilot program for its digital currency DCEP. According to a report from "Liberty Times", the digital currency project team at the Taiwan Central Bank also stated that they are expected to release an assessment report on the feasibility of testing the technology in the first half of the year. Subsequently, they will enter the experimental phase in preparation for the future issuance of a CBDC.

Since last year when Facebook attempted to launch its stablecoin project Libra, it not only drew attention and strong resistance from authorities worldwide but also indirectly prompted central banks internationally to consider the possibility of issuing digital currencies. The International Monetary Fund (IMF) survey report from June last year also indicated that central banks around the world are likely to issue cryptocurrencies in the future.

The Taiwan Central Bank is no exception. In May last year, it established the "Central Bank Digital Currency (CBDC) Research Project Team" responsible for research on CBDC, blockchain, and electronic payments. Central bank officials believe that Taiwan has established a sound payment infrastructure, and there is no urgent need to issue CBDC. CBDC cannot completely replace paper money, and the most feasible approach should be "dual-track operation."

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Officials stated that Taiwan's progress is in sync with most countries in Singapore and Europe. After the emergence of Bitcoin, various sectors have conducted extensive research on blockchain or Distributed Ledger Technology (DLT) as the foundation for digital currency technology. The central bank plans to establish a small-scale experimental platform in the second half of the year after the relevant technology testing report is released, and intends to involve both banking and non-banking payment institutions in the experiment among banking institutions.

China's DCEP

Taiwanese officials pointed out that China's DCEP test is a small-scale, preliminary experiment that seems "very rudimentary." Participants are limited to local government agencies or employees of state-owned enterprises, and those who have accounts opened in the four major state-owned banks such as the Industrial and Commercial Bank of China (ICBC) will receive 50% of their transportation subsidies in digital currency.

Previously, there have been reports on China's testing of DCEP, showing that the digital renminbi is currently being tested in four locations: Shenzhen, Guangdong; Xiong'an, Hebei; Chengdu, Sichuan; and Suzhou, Jiangsu. Since China revealed in 2019 that it would launch an official version of virtual currency, DCEP is now in the final countdown phase before its official launch.

Reflections on the Cashless Society in the Nordic Countries

The Central Bank of Taiwan also emphasized that the current CBDC technology is not yet mature, and there are significant challenges in terms of regulations. Even in the Nordic countries such as Sweden and Finland, which have the highest degree of "cashlessness," they have not been able to achieve a completely "cashless" environment. They have raised many concerns, including the inability to cater to vulnerable groups who use cash and issues related to backup systems. If they were to suffer a cyber attack, it could halt all economic activities.

According to previous reports, Sweden is one of the countries with the highest degree of "cashlessness" in the world, with cash transactions accounting for only 1-2% of the overall economy. In February of this year, the country announced a one-year CBDC trial plan.

Taiwan's central bank officials emphasized that while the central bank is actively preparing for the issuance of CBDC, they believe that "CBDC cannot replace all cash transactions." The most feasible approach may be to have a "dual-track system" in operation.