Taiwan's CBDC Progress: Central Bank States No First Mover Advantage, Not an International Race, Domestic Needs Take Priority

In the 4th session of the 10th term of the Finance Committee of the Legislative Yuan in Taiwan, the Central Bank, Ministry of Justice, Financial Supervisory Commission, and National Development Council reported on the "Preparation status of Central Bank Digital Currency (CBDC) and how to respond to the entry of cryptocurrencies into the financial market." Here are some key points:

Taiwan Central Bank's CBDC Progress

• In June 2020, completed a study on technical feasibility to understand the potential and limitations of distributed ledger technology in CBDC. Performance is yet unable to meet high-frequency payment demands.
• A general CBDC trial is in progress, with an expected completion of retail payment scenario trials by September 2022.

Specific simulated activities include:

• Creating CBDC digital wallets
• Exchanging CBDC from bank deposits or cash
• Transferring or using CBDC for payments at physical or online stores
• Government issuance of digital vouchers
• Assisting migrant workers with cross-border small amount remittances

The CBDC being tested in Taiwan operates on a two-tier structure: central bank to financial institutions, and financial institutions to the public. The design considers offline payments, privacy, availability at all times, loss handling mechanisms, interest settings, interoperability, and programmable currency functions.

Overall, the central bank believes that CBDC technology does not have a first-mover advantage, and the development among countries is not a competition but should meet domestic needs. For example, some emerging countries are issuing CBDCs through the central bank to achieve inclusive finance due to inadequate infrastructure, high issuance costs, and poor private electronic payment adoption; while in China, where there is a monopoly in private payments and a decline in cash usage, CBDC enables the public to access the safest central bank currency.

Regarding cryptocurrencies like Bitcoin, the central bank views them not as payment tools, with very low actual usage rates, and they are evolving towards financial products, to be supervised in cooperation with financial regulatory authorities.

Opinions of FSC, MOJ, and NDC

The Financial Supervisory Commission (FSC) and Ministry of Justice (MOJ) mainly responded on the regulation of cryptocurrencies:

• Cryptocurrencies with securities nature, security-type tokens, exempt from reporting obligations under the Securities and Exchange Act for fundraising below 30 million NTD. Beyond that, application for sandbox experimentation is required. Platforms conducting STO security token issuance business must obtain a securities dealer license and adhere to regulations on securities anti-money laundering and combating the financing of terrorism (AML/CFT).
• Cryptocurrency platforms are included in the scope of anti-money laundering laws. For more details, please refer to: Key points to know about the draft of anti-money laundering for cryptocurrency platforms.

The National Development Council (NDC) emphasizes industry financial innovation assistance as its main focus, liaising with government and private resources to address various challenges.