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Turkey’s central bank announced today that it had completed the first set of tests for its long-planned digital currency.
The Central Bank of the Republic of Turkey (CBRT) said that it plans to continue running tests for its digital lira next year.
“The CBRT will continue to run the limited, closed-circuit pilot tests with technology stakeholders in the first quarter of 2023,” the statement read. “Findings obtained from these tests will be shared with the public via a comprehensive evaluation report.”
Upcoming phases will explore “the use of distributed ledger technologies in payment systems and the integration of these technologies with instant payment systems,” the announcement read.
Turkey’s central bank has been working on its own CBDC—a digital version of a state’s fiat currency—for years. CBDCs are digital assets backed by a central bank, and are very different from the likes of Bitcoin and Ethereum. This is because they are centralized: a central power—the government or central bank—controls them.
Bitcoin and many other digital assets are decentralized: no one entity controls them and their ledger of transactions is maintained and checked by a distributed network of validators.
Countries around the world are in different stages of researching and releasing CBDCs. Last month, news surfaced that Japan’s central bank was planning a CBDC experiment with the country’s megabanks. Meanwhile, the Reserve Bank of India has proposed a phased pilot of its version of a digital rupee.
China is by far the furthest ahead of the major economies: citizens can already spend the digital yuan.
Turkey makes for an interesting case study because the country’s money is one of the worst performing emerging market currencies: this year it lost 29% of its value. Because of this, citizens are interested in digital assets like Bitcoin.
Back in 2020, Ali Babacan, a founding member of DEVA, Turkey’s opposition party, told Decrypt that a digital lira would not solve the country’s economic woes.
Despite many countries around the world being in varying states of progress with CBDCs, privacy advocates have criticized the idea of the assets—claiming they could allow the state to snoop on and control citizens’ spending.
Crypto exchange ShapeShift’s founder Erik Voorhees told Decrypt in February that the assets were an “Orwellian spy surveillance nightmare.”
For its part, Turkish officials say “digital identification is of critical importance for the project.”