Turkey Conducts First Transaction Using Digital Lira

Turkey Conducts First Transaction Using Digital Lira

The Turkish central bank, CBRT, has completed its first transaction using the digital lira. In the second phase of testing, the government will study economic, legal and technological requirements of the CBDC before deciding on its issuance by the end of 2023. 

On December 29, the Central Bank of the Republic of Turkey (CBRT) successfully executed its first transaction using the digital lira, the country’s upcoming central bank digital currency (CBDC), on the Digital Turkish Lira Network. The tests conducted as part of the central bank’s Digital Turkish Lira Project will continue to run limited and closed-circuit pilot programs in the first quarter of 2023, before expanding its collaboration platform to include selected banks and financial technology companies by the end of the year. 

According to a press release by the CBRT, results from the tests will be shared with the general public through a “comprehensive evaluation report”, before the banking authority unveils the next phase of its digital lira feasibility study that will widen the scope of participation. Going forward, the central bank will test the use of blockchain-powered distributed ledger technology (DLT), which is the underlying architecture of cryptocurrencies, in its existing payment systems and learn how the tech can be integrated with instant payment systems. 

Turkey Conducts First Transaction Using Digital Lira

The CBRT first revealed plans to introduce a digital currency into Turkey’s economy in September 2021, with the announcement of the ‘Central Bank Digital Turkish Lira Research and Development Project’. 

The technological research, development and testing process for the digital lira is being carried out in collaboration with stakeholders including Ankara-based defence contractor Aselsan, Turkish software company Havelsan, and Tubitak-Bilgem – the scientific and technological research centre of Turkey. The central bank signed bilateral memorandums of understanding (MOU) with all three parties and formed the “Digital Turkish Lira Collaboration Platform”. 

In the first phase, the CBRT developed a prototype “Digital Turkish Lira Network” that ran several close-circuit pilot tests, which concluded with its first transaction on Tuesday. The central bank will only announce its final decision regarding issuance of the digital lira once the collaboration platform completes “capacity measurements of different technological alternatives” and finalises architectural set up for the CBDC framework. The Turkish government has asked the CBRT to prioritise studies on the economic and legal framework, as well as the technological requirements of the digital currency throughout 2023. 

Central Bank Digital Currencies or CBDCs are very different from other cryptocurrencies. While Bitcoin (BTC) and Ethereum (ETH) are decentralised tokens managed by a network of individual computer “nodes”, CBDCs are digital versions of a country’s fiat currency that is centralised. Meaning they are controlled by a central authority – like the government or a national bank. 

Recently, several countries including the United Kingdom, India, and Kazakhstan have begun pilot programs for their respective central bank issued digital currencies. The Bank of England (BoE) has opened applications for a proof-of-concept CBDC wallet, while the National Bank of Kazakhstan (NBK) announced plans to to release a CBDC powered by the Binance Smart Chain (BNB) as early as 2023, and the Reserve Bank of India (RBI) is already testing interbank settlements within the country using the digital rupee. 

China is the world leader when it comes to CBDCs. The digital yuan, which has been in development since 2014, is widely used by residents and has completely replaced banknotes in several areas of the nation’s economy. The case of Turkey is interesting because the lira is one of the worst performing currencies in the world. This year alone, it lost 29% of its value to the dollar, causing citizens to pivot to cryptocurrencies as a store of value. However, this has not hindered the government’s drive to develop a digital token backed by the weakening Turkish lira. 

Also Check: $1 Million Worth Of Crypto Linked To Alameda Research On The Move

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