The country’s central bank has completed the first test of its CBDC.

Turkish Lira Image: Shutterstock

Turkey’s central bank announced today that it has completed the first set of tests for 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.

“CBRT will continue to conduct limited closed-circuit pilot testing with technical stakeholders during the first quarter of 2023," the statement read. "The results of these tests will be shared with the public through a comprehensive evaluation report."

The next phases will explore “the application of distributed ledger technologies in payment systems and the integration of these technologies with instant payment systems,” the announcement reads.

For years, Turkey’s central bank has been working on developing its own CBDC — a digital version of the country’s fiat currency. CBDCs are digital assets backed by a central bank and are very different from the likes of Bitcoin and Ethereum. That’s because they are centralized: a central authority — a government or central bank — controls them.

Bitcoin and many other digital assets are decentralized: no single entity controls them, and their transaction ledgers are maintained and checked by a distributed network of validators.

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

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

Turkey is an interesting case study because the country’s currency is one of the worst-performing emerging market currencies: it has depreciated 29% this year. Because of this, citizens are interested in digital assets like Bitcoin.

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

While many countries around the world have made varying progress on CBDCs, privacy advocates have criticized the idea of ​​the assets — claiming they could allow the state to snoop on and control citizens’ spending.

Erik Voorhees, founder of cryptocurrency exchange ShapeShift, told reporters in February that these assets are an “Orwellian surveillance nightmare.”

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