- CBDC that pays interest on digital asset deposits would probably replace bank deposits.
- Taiwan’s CBDC pilot program is presently distributed to five chosen Taiwanese banks.
Chin-long Yang, governor of the Central Bank of the Republic of China (Taiwan), has advocated a no-interest design for the country’s central bank digital currency (CBDC) pilot, according to local news portal bnext.com on Wednesday. According to Yang’s explanation, a CBDC that pays interest on digital asset deposits would probably replace bank deposits in fiat New Taiwan dollar (NT$).
Demand For Electronic Payment Solutions
“Digital bank runs” might lead to a liquidity crisis for financial institutions, even if interest-free CBDCs are used, Yang cautioned in a statement. Although the country’s central bank chief acknowledged an increase in recent years in demand for electronic payment solutions.
The governor stated:
“The ratio of electronic payments as a % of all payments in Taiwan has risen from 40% in 2017 to 60% in Q1 2022. Therefore, there is the possibility of greater demand in the populace for a CBDC that provides a safe, trusted, no-commission, no credit risk and no liquidity risk form of digital payment solution.”
Taiwan’s CBDC pilot program is presently distributed to five chosen Taiwanese banks in its second round. Based on the pilot program findings, the central bank will go forward in its plans for the future. However, it has already been shown that the distributed ledger technology in the CBDC is incapable of handling high-frequency, high-volume consumer transactions in testing. In the case of a power loss, the payment solution may not operate properly.
A new technique to make digital money broadly accessible, such as Bitcoin, is still in its infancy. This is why central banks are building their own digital currencies, such as CBDC, which they hope will provide safe and secure new payment methods.
Recommended For You:
