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Turkey set to pilot digital currency in 2021

The announcement by Turkey's Central Bank chief, Naci Agbal fast-tracks the country's adoption of a central bank digital currency (CBDC).

Turkey will embark on the pilot phase of a sovereign-backed digital currency next year, according to a statement made by Central Bank President Naci Agbal in parliament on Friday, according to a TRT World report.

Agbal’s comments on Turkey’s digital currency ambitions shouldn’t come as a surprise: Turkey has been considering a national cryptocurrency and researching a possible central bank digital currency (CBDC) since 2019.

In its 2019-2023 economic roadmap published last July, the government included the adoption of “Blockchain-based digital central bank money”.

Turkish President, Recep Erdogan. Image Source: Vox

The rollout of a CBDC comes after President Recep Erdogan previously announced that trials for a digital currency system would be finalised by the end of 2020. Within the trials, the government intends to develop a software platform for instant payments based on the “digital lira."

Development on a CBDC comes as the country’s central bank grapples with high inflation and rising consumer prices. Appointed as central bank head last month, Agbal is determined to lower the inflation rate to meet the annual target of 9.4 percent.

The Turkish public is very much open to the idea of cryptocurrencies, with 20 percent owning at least one form of digital currency at some point in their life. Nearly half of Turks have plans to use cryptocurrency in the event paper money declines over time.

Social distancing measures and concerns around cash payments during the Covid-19 pandemic have only accelerated the shift towards digital payments and government payment schemes, providing further impetus for CBCD implementation.

The first publicly announced work on retail CBDCs was conducted by the Swedish Riksbank, and eventually its “e-krona” project was developed to the point where the bank announced a pilot with Accenture this February.

And in a landmark move, the Central Bank of the Bahamas officially launched its digital “sand dollar” in October, which is the first CBDC to be fully deployed in a country.

The most advanced CBDC project to date is being conducted by the People’s Bank of China. It's Digital Currency Electronic Payment (DC/EP) or “digital yuan” began trials in four Chinese cities in April.

The US, UK, EU and Russia are also looking into their respective CBDC pilots.

Turkey In Focus

Population: $83.429 million (Compared to UK's 66.8 million)

GDP: $761.425 billion (Compared to UK's $2.827 trillion)

GDP Per Capita: $9,690 billion (Compared to UK's $42,370)