Is there a country that, despite inflation and currency devaluation, has plans to launch a central bank digital currency (CBDC)? Yes. Turkey. A Eurasian nation that is going through a period of economic difficulty and that, despite this, has the clear objective of bringing its local currency on the digital level.
Recep Tayyip Erdoğan's government will begin testing the country's CBDC as early as next year, according to what was presented in Turkey's Annual Presidential Program for 2023, published this week in the Official Gazette. Even if they haven't set the exact date.
Full CBDC studies by 2023
The arrival of the CBDC within the next year is in line with the results of the second phase of the research and development project of this currency, which began in September 2021. At the time, the central bank presented this type of digital currency as a way to integrate the existing payment infrastructure in the country.
In this sense, Erdogan's government estimates that by 2023 the studies for the integration of the digital Turkish lira system with the national banking identity will finally be completed.
This means that the Turkish CBDC will be integrated into the local financial system on the basis of the FAST, the payment system designed by the country's central bank. The ultimate goal of the project would be to strengthen Turkey's existing financial infrastructure, despite economic data suggesting a bad time for the local currency.
Erdogan's annual program for 2023 suggests that the body in charge of creating the Turkish lira will be the central bank itself. The Ministry of Finance and other technological research institutes will also be involved.
If the presidential document is implemented, the process of creating a CBDC, which has been underway for just over three years, will be completed. In 2019, the Erdogan administration considered the creation of the digital Turkish lira. The project is part of Turkey's five-year economic development plan.
High inflation and devaluation of the Turkish physical lira
The announcement of the Turkish CBDC comes at a time when the country is suffering from economic problems that have not been seen for more than two decades. According to the National Statistics Office, inflation exceeded 83% in September alone, a figure not seen since 1998.
In this context, the Turkish lira has suffered severe depreciation for at least three years. Recently, the Turkish currency was reported to have depreciated by nearly 25% against the US dollar this year.
These data show that the Turkish economy is in crisis, which is detrimental to the well-being of the population. That's why this community has been taking refuge in bitcoin for years (quotation BTC) and other cryptocurrencies, despite Erdogan's government banning their use.
Less than a year ago Erdogan declared that he was "at war" against bitcoin and its ecosystem, hinting that he would take measures to curb the growing use of these assets in the country. Furthermore, the central bank has banned the use of cryptocurrencies starting in April 2021.
But that hasn't stopped the ecosystem from growing. Turkey is the 12th country in the world with the highest cryptocurrency adoption rate, according to the most recent list provided by blockchain security and analysis firm Chainalysis.
