The Central Bank of the Republic of Turkey (CBRT) has taken significant strides towards digitizing its national currency, releasing an English translation of its report on the initial phase of the Central Bank Digital Turkish Lira Research and Development (R&D) Project. Originally published in Turkish last year, the document details the progress made in developing a central bank digital currency (CBDC) and was made available in English on February 19.
Digital Turkish Lira: A step towards modernization
The report outlines the CBRT’s efforts beginning in 2021 to explore the feasibility and implementation of a digital Turkish lira. The first phase of the project focused on several key components, including the digital identity system, digital currency system, abstraction layer, service layer, and wallet. The abstraction layer, in particular, enhances the system’s modularity, ensuring that all components operate independently for easier replacement and updates. This phase culminated in the CBRT conducting its first trial transactions with the digital Turkish lira in 2022, marking a pivotal moment in Turkey’s journey toward digital currency adoption.
Collaborating with the Scientific and Technological Research Council of Türkiye and companies such as Aselsan and Havelsan, the CBRT has developed the Digital Turkish Lira Collaboration Platform. This platform underpins the operation of the digital lira, which is designed as an intermediated retail CBDC, with wholesale payments being addressed separately. The CBRT emphasizes the digital lira’s high degree of interoperability and aims to complement, rather than compete with, existing financial products and services.
Looking ahead: The future of digital transactions in Turkey
Moving forward, Phase II of the project will delve into smart payments and the possibilities of offline transactions, with the chosen protocol for the latter yet to be determined. This next phase will also consider the legal and economic aspects of digital currency implementation. The CBRT’s approach to digital transactions includes making them available on intermediaries’ mobile apps, although no specific timeline for Phase II has been provided.
Turkey’s exploration of a digital lira comes at a time when the country is also focusing on creating a regulatory framework for cryptocurrency. Addressing the current gaps in crypto regulation is crucial for Turkey as it seeks to improve its standing with the Financial Action Task Force. The CBRT’s report underscores Turkey’s commitment to embracing digital innovation in its financial systems, setting the stage for a future where digital transactions play a central role in the economy.