The Central Bank of the Republic of Turkey (CBRT) has recently published an English version of its report assessing the initial stage of its Central Bank Digital Turkish Lira Research and Development (R&D) Project, which aims to develop a central bank digital currency (CBDC). While the report was initially released in Turkish last year, the English translation became available on February 19.
The first phase of the project focused on various aspects, including the digital identity system, digital currency system, abstraction layer, service layer, and wallet. The abstraction layer plays a crucial role in supporting the system’s modularity. The project’s first phase commenced in 2021, and in 2022, the CBRT conducted its initial trial transactions using the digital Turkish lira.
Each component of the system operates independently, allowing for seamless replacement if necessary. The system functions on the Digital Turkish Lira Collaboration Platform, which is managed by the CBRT in collaboration with the Scientific and Technological Research Council of Türkiye, as well as the Aselsan and Havelsan companies.
The digital Turkish lira was designed as an intermediated retail CBDC, with a separate study conducted for wholesale payments. The CBDC emphasizes a high level of interoperability and complementarity. The CBRT expressed its preference for programmable payments rather than programmable money. It outlined the ability to create contract templates with specific conditions related to credentials and payment interfaces. The involvement of public institutions and licensed entities in the development, approval, deployment, presentation, updating, and deactivation of contracts was also highlighted. The report emphasized the importance of self-sovereign identity in protecting privacy.
The upcoming second phase of the project will focus on smart payments and offline payments. The protocol for offline payments has yet to be determined. Legal and economic considerations will also be addressed during this phase. Additionally, digital transactions will be incorporated into mobile apps provided by intermediaries. No specific timeline was provided for the second phase.
Turkey is also actively working on establishing a regulatory framework for cryptocurrencies. The country’s inadequate crypto regulation reportedly contributes to its inclusion on the Financial Action Task Force’s gray list.
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