The Central Bank of Turkey has officially launched its digital lending initiative

In an English-language paper, Turkey’s central bank detailed the country’s first efforts to establish a CBDC.

The Turkish national bank, the Central Bank of the Republic of Turkey (CBRT), has released a paper in English detailing the first phase of its digital Turkish lira research and development project, marking a major step towards digitizing the lira. Released in English on February 19, the paper describes the progress achieved in building a central bank digital currency (CBDC) and was first released in Turkish last year.

Beginning in 2021, the study details the CBRT’s endeavors to investigate and perhaps implement a digital Turkish currency. Wallets, digital identities, abstraction layers, digital currencies, and service layers were the primary areas of concentration in the project’s first phase.

For instance, the abstraction layer improves the system’s modularity by making sure that each component can work on its own, which makes modifications and replacements simpler. A watershed milestone in Turkey’s path toward digital currency acceptance came at the end of this phase in 2022, when the CBRT conducted its first trial transactions using the digital Turkish lira.

Aselsan, Havelsan, and the Scientific and Technological Research Council of Turkey worked along with the CBRT to create the Digital Turkish Lira Collaboration Platform. With wholesale payments handled independently, this technology supports the digital lira’s functioning as an intermediate retail CBDC. The CBRT hopes to supplement current financial goods and services rather than compete with them, and it highlights the digital lira’s high level of interoperability.

The second phase of the research will investigate offline transactions and smart payments; the protocol for the latter is still up in the air. The economic and legal implications of introducing digital money will be considered in the next stage as well. Although the exact date for Phase II of the CBRT’s strategy for digital transactions is unknown, it involves making them accessible on the mobile applications of intermediaries.

Coincidentally, with its efforts to establish cryptographic regulations, Turkey is investigating the possibility of a digital lira. If Turkey wants to improve its status with the Financial Action Task Force, it must address the loopholes in crypto law. The research by the CBRT highlights Turkey’s determination to integrate digital innovations into its financial institutions, paving the way for a future where digital transactions are pivotal to the economy.

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