Promotion of Digital New Taiwan Dollar Represents a Key Milestone in Taiwan’s Financial Digitization, Yet Challenges Remain in Integrating It into Daily Transactions
(Previous Context: China Frenzies for RTX5090 “8-card DeepSeek R1 Training” Taiwan Bundled Gift Packages Surge to 400,000 TWD)
(Background: The Financial Supervisory Commission Plans to Allow Banks to Issue Stablecoins: Pegged to TWD, USD, with a Heavy Penalty for Market Manipulation of Up to 200 Million TWD Over Ten Years)
In recent years, news of “digital currency network fraud” has emerged constantly, raising doubts about digital and cryptocurrency assets. However, digital currency is not limited to cryptocurrencies like Bitcoin and Ethereum. Central Bank Digital Currencies (CBDCs) are becoming a global trend, and Taiwan’s Central Bank is actively researching the “Digital New Taiwan Dollar.”
What is the Digital New Taiwan Dollar? How Is It Different from Existing Currency?
The Digital New Taiwan Dollar is a type of Central Bank Digital Currency (CBDC), essentially a digital version of the New Taiwan Dollar. Unlike the paper bills and coins we currently use, it exists in electronic form and can be stored in digital wallets on mobile phones for payments through mobile devices. However, it is still issued by the central bank and holds legal tender status.
How does this differ from existing payment tools like electronic payments and credit cards? The key difference lies in “central bank issuance.” Currently, payment tools such as credit cards, LINE Pay, and Apple Pay operate through banks or payment platforms and still require clearing through commercial banks for transactions. In contrast, the Digital New Taiwan Dollar is directly issued by the central bank, eliminating the need for bank intermediaries. As a result, it could potentially reduce transaction costs and enhance the convenience and security of payments.
Main Features and Potential Impacts of the Digital New Taiwan Dollar
The launch of the Digital New Taiwan Dollar will inevitably impact Taiwan’s current payment ecosystem. Here are some key changes worth noting:
- Legal Tender Status – Businesses May Be Required to Accept It in the Future
- Can It Truly Replace Existing Payment Tools?
- Balancing Privacy and Regulation
The physical New Taiwan Dollar issued by the central bank currently holds legal tender status in Taiwan, meaning that businesses cannot refuse to accept cash. If the Digital New Taiwan Dollar is formally issued and granted the same legal status as physical currency, businesses may be required to accept it in the future.
However, practically, if a business lacks the necessary digital payment equipment, will it have the right to refuse? This could become a legal dispute. For example, in the early days of electronic payments, some businesses still only accepted cash due to equipment or technical limitations. The Digital New Taiwan Dollar may face a similar adaptation period. The central bank will need to clarify the regulations for such transaction scenarios to prevent consumer disputes.
The electronic payment ecosystem in Taiwan is already well-established, with high usage rates for credit cards, mobile payments, and electronic wallets. How should the Digital New Taiwan Dollar position itself? If it is merely “another payment method,” will people be willing to change their habits?
The key factor may be transaction costs and financial regulation. While electronic payments are convenient, merchants currently incur card processing fees. If the transaction costs for the Digital New Taiwan Dollar are lower, businesses may be more inclined to adopt it. Furthermore, if the government can use the Digital New Taiwan Dollar to improve financial transaction transparency and prevent money laundering and fraud, it could alter the roles and market competition of commercial banks and existing payment service providers.
While the Digital New Taiwan Dollar could increase transaction transparency and reduce illicit financial flows, it may also impact personal privacy. How the central bank designs the privacy protection mechanisms for the Digital New Taiwan Dollar, and whether it will lead to excessive government control over transaction data, will be a key concern for the public.
Internationally, the European Central Bank has considered ensuring a degree of anonymity for small transactions when designing the digital euro while requiring larger transactions to comply with financial regulatory standards. Whether Taiwan’s central bank will adopt a similar approach remains to be seen.
Latest Developments and 2024 Progress on the Central Bank’s Plans
As early as 2022, Taiwan’s Central Bank completed a pilot program for retail CBDCs and established a prototype CBDC platform. The bank is currently working on technical optimizations and application testing.
According to the latest announcement from the Central Bank, from April 2024, public hearings and forums will be held to collect industry and public feedback to raise awareness of the Digital New Taiwan Dollar. Additionally, it is expected that the “Digital Public Infrastructure Cash Flow Platform” will be launched in July 2024 to process payments for government-issued digital vouchers and subsidies, providing a testbed for the application scenarios of the Digital New Taiwan Dollar.
Moreover, the Central Bank plans to promote deposit token technology, which may be applied to inter-company transactions such as government bidding guarantees and interbank settlements, in order to improve the efficiency of digital finance.
Related Reports
- China Frenzies for RTX5090 “8-card DeepSeek R1 Training” Taiwan Bundled Gift Packages Surge to 400,000 TWD
- Financial Supervisory Commission Plans to Allow Banks to Issue Stablecoins: Pegged to TWD, USD, with a Heavy Penalty for Market Manipulation of Up to 200 Million TWD Over Ten Years
- Bitcoin Flash Crash to 91,000 TWD》USDT to TWD Surges Over 35 TWD, Binance, OKX OTC Premiums Exceed 6%