Taiwan Central Bank Takes Cautious Approach to CBDC Amid Global Developments

• Taiwan’s central bank emphasizes steady CBDC progress and is cautious of rushed implementations.
• Prototype platforms for retail and wholesale CBDCs showcase Taiwan’s digital currency strides.
• Regulatory updates in Taiwan aim to bolster digital asset market oversight and investor safety.

Taiwan’s central bank, led by President Yang Jinlong, has emphasized a deliberate strategy in developing a central bank digital currency (CBDC), distinguishing itself from other nations racing to launch CBDCs. 

Yang stressed that Taiwan aims for steady progress rather than rushing into implementation, noting that being the first mover in CBDCs does not guarantee success, citing mixed outcomes in countries that have already experimented with CBDCs.

In a recent report to the Finance Committee of the Legislative Yuan, Yang outlined Taiwan’s ongoing efforts to enhance domestic payment efficiency through digital innovations. The central bank is conducting experiments in various scenarios, focusing on improving payment system processing efficiency and exploring innovative applications without committing to a specific timeline for CBDC issuance.

One notable advancement is the development of a CBDC prototype platform tailored for retail payments, capable of supporting digital coupon transactions at speeds of up to 20,000 transactions per second (TPS). 

Additionally, Taiwan’s central bank is progressing with a proof-of-concept for wholesale CBDC, integrating CBDC with bank deposit tokens to pave the way for a future digital currency framework designed to serve as a liquidation asset for asset tokenization.

While advancing digital currency initiatives, Taiwan’s central bank clarified its stance on virtual assets, affirming that cryptocurrencies like Bitcoin and stablecoins are distinct from its digital currency endeavors. 

Instead, the focus remains on leveraging tokenization technology to transform both wholesale central bank currency and commercial bank currency, facilitating various asset tokens.

Looking ahead, the central bank plans to collaborate with participating banks to establish a unified tokenization platform, facilitating inter-bank transfers of bank deposit tokens, simultaneous delivery of asset tokens (DVP), and specialized digital currencies. 

These initiatives align with Taiwan’s broader digital policy objectives, aiming to meet public digital payment needs while ensuring substantial benefits and regulatory clarity.

The Financial Supervisory Commission (FSC) of Taiwan plans to suggest new rules for digital assets by September 2024. These rules are meant to make the digital asset market work better and protect investors more.