The Central Bank of the Republic of Turkey (CBRT) has published an English rendition of its assessment report on the initial phase of the Central Bank Digital Turkish Lira Research and Development (R&D) Project, aimed at crafting a central bank digital currency (CBDC). While the report was originally issued in Turkish last year, the English translation became available on Monday, February 19th.
Thank you for reading this post, don't forget to subscribe!The initial stage of the project focused on the development of the digital identity system, digital currency system, abstraction layer, service layer, and wallet. The abstraction layer was designed to enhance the system’s modularity. Commencing in 2021, the first phase of the project saw the CBRT conducting its inaugural trial transactions with the digital Turkish lira in 2022.
Each component of the system functions autonomously, facilitating straightforward substitution when necessary. The system is supported by the Digital Turkish Lira Collaboration Platform, jointly managed by the CBRT, the Scientific and Technological Research Council of Türkiye, and the companies Aselsan and Havelsan.
The digital Turkish lira was created to serve as an intermediated retail CBDC, with wholesale payment systems investigated through a distinct procedure. The Turkish CBDC assures a significant level of interoperability: “The system should not harm economic and financial processes. It should not aim to compete with existing financial products and services.”
The CBRT expressed a preference for programmable payments rather than programmable currency. They highlighted the ability to generate contract templates with specific conditions related to credentials and payment interfaces, stating that “Public institutions and different licensed actors will be able to take part in the development, approval, deployment, presentation, updating and deactivation of contracts,”
Self-sovereign identity constitutes a pivotal aspect of privacy safeguards.
Phase II of the project will explore smart payments and offline transactions. The protocol for offline payments remains undecided, with attention also directed towards legal and economic factors. Digital transactions will be integrated into intermediaries’ mobile applications and no specific timeline has been provided for the second phase.
Turkey is also looking to establish a regulatory structure for cryptocurrency. Allegedly, the country’s lax crypto regulations are the primary concern contributing to its placement on the Financial Action Task Force’s gray list.
