Financial Classroom" The central bank's "Digital New Taiwan Dollar" will be trialled in July! Understand what CBDC is and how to use it
The promotion of the digital New Taiwan Dollar represents an important milestone in Taiwan's financial digitization, but there are still many challenges to be solved in how to coexist with existing payment tools and truly integrate into daily transactions.
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(Background supplement: The Financial Supervisory Commission plans to open banks to issue stable coins: pegged to the New Taiwan dollar and the US dollar, and the most severe penalty for market manipulation is ten years 2 billion)
Contents of this article
In recent years
News about "digital currency Internet fraud" has emerged one after another, causing many people to have doubts about digital and cryptocurrency. However, digital currencies are not limited to cryptocurrencies such as Bitcoin and Ethereum. Central bank-issued digital currencies (CBDC) are becoming a global trend, and Taiwan's central bank is also actively studying the "digital New Taiwan Dollar."
What is the difference between the digital New Taiwan Dollar and the current New Taiwan Dollar? What is the difference between it and electronic payment and credit card? When it does hit the road, how will our daily transactions be affected? This article will take you through the key concepts of central bank digital currency.
What is the digital New Taiwan Dollar? How is it different from existing currencies?
The Digital New Taiwan Dollar is a Central Bank Digital Currency (CBDC). Simply put, it is the digital version of the New Taiwan Dollar. Different from the banknotes and coins we currently use, it exists in electronic form and can be stored in a digital wallet on a mobile phone and paid through mobile devices. However, it is still essentially a currency issued by the central bank and has legal effect.
How is this different from existing mobile payments or e-wallets? The key lies in "issuance by the central bank". Current payment tools, such as credit cards, LINE Pay, and Apple Pay, all operate through banks or payment platforms, and transactions still need to be cleared through commercial banks. The digital New Taiwan Dollar is issued directly by the central bank without going through a bank intermediary, so it may reduce transaction costs and improve the convenience and security of payment.
The main features and potential impacts of the digital New Taiwan Dollar
The launch of the digital New Taiwan Dollar will inevitably affect Taiwanâs existing payment ecosystem. The following points are changes worthy of attention:
1. With legal currency status, future stores Stores may not refuse to accept them
Currently, physical New Taiwan dollars issued by the central bank have legal validity for transactions in Taiwan in accordance with the law. In other words, stores may not refuse to accept cash. If the digital New Taiwan Dollar is officially issued and given the same legal status as physical currency, merchants maynot reject the Digital New Taiwan Dollar in the future.
But in practice, if a store is not equipped with digital payment equipment, does it have the right to refuse payment? This will become a legal dispute. For example, in the early days of the popularity of electronic payments, some merchants still only accepted cash due to equipment or technical limitations. The digital Taiwan dollar may face a similar adaptation period. The central bank needs to clarify the regulations for this type of transaction scenario to avoid consumer disputes.
2. Can it truly replace existing payment tools?
At present, Taiwanâs electronic payment ecosystem is quite mature, with high usage rates of credit cards, mobile payments, and e-wallets. How should the digital New Taiwan dollar be positioned? If it is just "another payment method", will people be willing to change their habits?
The key may lie in transaction costs and financial regulation. Although electronic payment is convenient at present, merchants need to pay card swiping fees. If the transaction cost of digital New Taiwan dollars is lower, merchants may be more willing to accept it. In addition, if the government improves the transparency of financial transactions and prevents money laundering and fraud through the digital New Taiwan Dollar, it may affect the roles and market competition of commercial banks and existing payment providers.
3. The balance between privacy and supervision
Although the digital Taiwan dollar can improve transaction transparency and reduce illegal capital flows, it may also affect personal privacy. How the central bank will design the privacy protection mechanism of the digital Taiwan dollar and whether it will allow the government to obtain too much transaction information will be a matter of concern to the public.
At present, internationally, when designing the digital euro, the European Central Bank is considering using technical means to ensure a certain degree of anonymity for small-amount transactions, but large-amount transactions still need to comply with financial regulatory standards. Whether Taiwan's central bank will take similar measures remains to be seen in follow-up planning.
The latest plan of the central bank and development progress in 2024
The Taiwan Central Bank has completed the retail CBDC pilot project as early as 2022 and established a CBDC prototype platform. It is currently undergoing technology optimization and application testing.
According to the latest announcement from the central bank, starting from April 2024, public hearings, forums and other activities will be held to extensively collect opinions from the industry and the public to enhance social awareness of the digital New Taiwan Dollar. At the same time, it is expected to launch the "Digital Public Construction Cash Flow Platform" in July, through which the government will process payment operations such as digital coupons and subsidies, and pilot the application scenarios of the digital New Taiwan Dollar.
In addition, the central bank also plans to promote deposit token technology, which may be used in inter-enterprise transactions in the future, such as government bidding deposits, inter-bank settlements, etc., thereby improving the efficiency of digital finance.
