Turkey’s central bank announced in a press release on December 29 that the first transactions involving its digital lira had been completed successfully.
Pilot Tests Into 2023
The Central Bank of the Republic of Turkey (CBRT) announced that the digital lira will continue to be subjected to “limited, closed-circuit pilot tests” throughout the first quarter of 2023. The findings will be made public in the form of a comprehensive evaluation report.
The digital Lira qualifies as a central bank digital currency, or CBDC, because it is being developed by the country’s central bank.
The announcement did not make any mention of what the CBDC would be pegged on. There is no clarity on whether the digital currency is pegged on the blockchain, distributed ledger technology (DLT), or other related technologies.
However, it appears that blockchain is heavily involved in the digital lira.
Back in September, Turkey’s central bank stated that the digital lira could be expanded “into areas such as blockchain technology [and] the use of distributed ledgers in payment systems.”
In an October budget announcement, the central bank stated that it would create “blockchain-based digital central bank money” — a statement that explicitly confirms that the digital lira is based in some way on blockchain technology.
Non-blockchain services, such as digital identity tools and Turkey’s Instant and Continuous Transfer of Funds (FAST) System, will also be integrated with the digital lira.
Turkey’s Conflicting Stance on Digital Currencies
Despite its apparent interest in creating a CBDC, Turkey has imposed strict regulations on cryptocurrency and public blockchains. The country banned the use of cryptocurrencies to effect payments in 2021. It also mandated that cryptocurrency companies store extensive, long-term KYC data on users.
The country also introduced other draft crypto laws back in the summer, and in recent months, there have been numerous arrests and confiscations involving crypto transactions.
CBDC’s Continue to Struggle
Turkey isn’t the only country expanding its CBDC operations. In fact, central banks in 114 countries have conducted some kind of research into digital currencies in the last year. These moves have not yet been met with widespread consumer acceptance.
An ex-official of the People’s Bank of China stated on Wednesday (Dec. 28) that consumers have shown little interest in the digital yuan during its two-year trial period.
“The cumulative circulation of the digital yuan in the two years of the trial has been only 100 billion yuan ($14 billion),” Xie Ping told a conference at Tsinghua University, adding that “usage has been low, highly inactive.”
Things are not any different in faraway Nigeria either, as reported earlier this month. According to a Bloomberg article, a year after its introduction, the government-issued digital currency, the eNaira, is only being used by less than 0.5% of Nigeria’s 217 million people.
The Central bank of Turkey’s interest in a CBDC coincides with Turkish authorities’ announcement that they will crack down on cryptocurrencies following a surge in interest as Turkish consumers sought to hedge against rising inflation.
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