Digital Lira is coming closer

Key points: 

• The first test of the digital Lira is completed by the Central Bank of Turkey.
• The Central Bank of the Republic of Turkey will continue limited, closed pilot testing with technology stakeholders through the first quarter of 2023.
• Findings obtained from these tests will be shared with the public via a comprehensive evaluation report.
• The upcoming phase will explore "the use of distributed ledger technologies in payment systems and the integration of these technologies with instant payment systems."
• Turkey's currency is one of the worst-performing emerging market currencies, losing 29% of its value this year. Because of this, citizens are interested in digital assets such as Bitcoin.

The Central Bank of Turkey announced that it has completed the first tests of its long-planned digital currency.

The Central Bank of the Republic of Turkey (CBRT) said it plans to continue testing its digital lira next year.

"The CBRT will continue limited, closed pilot testing with technology stakeholders through the first quarter of 2023," the statement said. "Findings obtained from these tests will be shared with the public via a comprehensive evaluation report."

The upcoming phase will explore "the use of distributed ledger technologies in payment systems and the integration of these technologies with instant payment systems," the announcement said.

For years, Turkey’s central bank has been working on developing its own CBDC — a digital version of the country’s fiat currency. A CBDC is a digital asset backed by a central bank and is very different from Bitcoin and Ethereum. That's because they're centralized: a central agency -- the government or central bank -- controls them.

Bitcoin and many other digital assets are decentralized: no one controls them, and their ledgers are maintained and verified by a distributed network of auditors.

Countries around the world are at different stages of researching and issuing CBDCs. Last month, news emerged that the Bank of Japan was planning to conduct a CBDC trial with the country’s largest banks. Meanwhile, the RBI has proposed a phased pilot of its version of the digital rupee.

So far, China is far ahead of major economies: citizens can already use the digital yuan.

Turkey is an interesting case study as its currency is one of the worst-performing emerging market currencies, losing 29% of its value this year. Because of this, citizens are interested in digital assets such as Bitcoin.

Back in 2020, Ali Babacan, a founding member of the Turkish opposition party DEVA, told Decrypt that the digital lira would not solve the country’s economic woes.

While many countries around the world are at various stages of progress with CBDCs, privacy advocates have criticized the idea of ​​assets, claiming they could allow states to monitor and control citizens' spending.

Erik Voorhees, a founder of cryptocurrency exchange ShapeShift, said in February that the assets were “an Orwellian spying nightmare.”

Turkish officials said, "Digital identification is crucial to the project."