Countries worldwide are advancing their efforts to develop digital fiat currencies, and Turkey has joined the race. Following the initiation of research and development in 2020, the Central Bank of the Republic of Turkey (CBRT) has published a report detailing the current status and progress of the Digital Turkish Lira project.
The report follows the completion of the “Digital Currency Proof of Concept Study” in 2021, which marked the transition to the next phase. The year 2021 also saw the selection of technology partners and the commencement of Phase-1 and pilot testing processes in 2022. The CBRT has now completed Phase-1 and is focusing on Phase-2, which will be the agenda for 2024.
The Digital Turkish Lira Collaboration Platform is set to expand with new participants, as indicated by the report. Beyond technical efforts, preparations related to the digital Turkish Lira are underway, including economic and legal frameworks.
Phase-1 encompassed various components, such as setting up a technical environment for the Digital Turkish Lira System, preparing infrastructure for testing, establishing a distributed ledger platform, designing smart contracts and applications, integrating a prototype digital identity system, developing a digital wallet application, conducting simulations and tests for issuance, distribution, online payment/transfer, and redemption scenarios, cybersecurity efforts, pilot testing, and measuring system performance and user experience.
Despite global concerns about privacy and surveillance risks associated with blockchain-based Central Bank Digital Currencies (CBDCs), the CBRT’s report emphasizes the importance of privacy, technological and architectural flexibility, interoperability, non-harm principles, and financial intermediary independence.
Independent of the platform participants’ efforts, the CBRT’s R&D activities have focused on interoperability across different networks and technologies, a wholesale payment system on the distributed ledger platform, privacy-preserving applications, high-performance architectural designs, comparison of programmable payment methods, and innovative use cases. The project will span three phases, with the first completed and significant pilot tests planned for each stage. Phase-2 will address intermediary integrations, smart payments, offline payments, hardware wallets, interoperability, high performance, and legal and economic aspects. Phase-3 will cover regulations, certification, and licensing processes if the decision to circulate is made.
