Chin-Long Yang, governor of the Central Bank of Taiwan, highlighted that the nation is about to take a significant leap towards digital finance with the launch of a CBDC pilot later this year.
According to Yang, although the CBDC prototype that Taiwan will test will not use blockchain technology or smart contracts, it will mark a unique approach to the digital finance landscape in the country.
Yang recently revealed that instead of relying on blockchain technology, the central bank's digital currency system will be implemented through the Ministry of Digital Affairs' digital scrip platform.
This is a novel approach that allows for a clear division of responsibilities within the digital ecosystem, Yang said.
Leverage existing financial infrastructure for CBDC
The Ministry of Digital Affairs will oversee the distribution of the digital vouchers, while the central bank will be responsible for managing financial transactions once users spend these vouchers. This strategy not only simplifies the process but also leverages the government's existing digital financial infrastructure.
On the other hand, although an official date for the launch or start of the pilot test of the future CBDC has not yet been confirmed, the authorities have indicated that these could begin at the end of this year or in early 2025. According to the statements, The digital voucher system itself could begin its testing phase in August and be operational in October, serving as a “warm-up” for the eventual implementation of the CBDC.
This movement towards a CBDC comes at a time when Taiwan is making significant progress in cryptocurrency regulation.
Taiwan prepares to regulate cryptocurrencies
The chairman of the country's Financial Supervisory Commission (FSC), Jin-Lung Peng, has announced plans to propose a special law for crypto assets by the middle of next year. This legislation aims to create a comprehensive regulatory framework for Taiwan's cryptocurrency market, which has until now largely operated without specific regulations.
Currently, the FSC requires cryptocurrency service providers to comply with anti-money laundering (AML) and know-your-customer (KYC) laws, but a legal framework dedicated to the crypto industry would offer greater clarity and oversight, as well as greater development opportunities for the market and its participants.
All of these initiatives related to cryptocurrency regulation demonstrate a multifaceted approach to regulating the crypto space in the country while encouraging technological innovation.
According to experts, the implementation of a comprehensive regulatory framework for cryptocurrencies in Taiwan will have several positive effects for users, by providing greater protection to investors, mitigating fraud and combating illicit activities. Likewise, users would also benefit from greater clarity and oversight in the market, increasing trust in the crypto industry as a whole.
