Cryptocurrency is the 21st-century innovative approach that can alter the financial system around the world. Cryptocurrencies are electronic cash that can be accessed via computers or mobile phones anywhere around the world. In fact, they are a secure form of money. Governments have been attracted to this market due to its safety, reliability, and security. Cryptocurrencies enable cross-border and high-speed transactions.
Hence, governments have started contemplating using digital currency payments in their financial systems to advance their economy. Plus, the covid-19 pandemic plays a significant role in hastening the move towards cryptocurrencies. Several countries have explored issuing state-backed crypto. According to BIS, the Bank for International Settlements, 80% of central banks are working on national digital currencies.
China is the first country that started testing its central bank-backed digital currency, known as DCEP (Digital Currency Electronic Payment). It has been about six years that the People’s Bank of China (PBOC) is working on this project. Sweden, the Bahamas have progressed to conduct phase soft launch. Russia is also considering launching a digital version of the Ruble. And recently, Turkey has announced that they are set to pilot a Turkish central bank digital currency (CBDC) in the second mid-2021.
The country’s central bank has been dealing with high inflation levels in recent years. Besides, 20 percent of Turkish citizens own cryptocurrencies, and society welcomes this approach. The President of Turkey, Recep Tayyip Erdoğan, has been trying to improve the country's economy. It has now been revealed that one of his decisions for this purpose was piloting central bank digital currency (CBDC). Naci Ağbal, the Governor of the Central Bank of Turkey, declared that “There is an R&D project initiated on digital money. Currently, the conceptual phase of this project has been completed. We aim to start pilot tests in the second half of 2021.” The detailed information has not yet been public.
This announcement came as a surprise to some as there is no record in the Bank for international settlements (BIS) that Turkey has been investigating its own CBDC. However, shifting towards the CBDC project may help Turkey to be able to attract global investors and strengthen its national economy.