Turkey’s central bank governor Naci Agbal told MPs last week that the country plans to experiment with central bank digital currencies in the second half of 2021. However, the founding leader of one of Turkey’s main opposition parties believes that this may not be enough to save the Turkish currency lira, which has a weak exchange rate.
The Central Bank of Turkey established Directorate-General Financial Innovation in November this year to conduct research on central bank digital currencies. Just two months later, the central bank president Agbal said:
“At present, the concept phase of this plan has been completed. Our goal is to launch the pilot program in the second half of 2021.”
At the same time, the exchange rate of the lira continues to collapse, hitting record lows frequently since the summer. The exchange rate of the lira against the US dollar has fallen 23% this year. Medeni Sungur, Dean of the Turkish Media Think Tank Digital Media and Research Institute said:
“Turkey’s digitization policy is partly because it wants to catch up with the rest of the world and is driven by a kind of technological optimization, that is, we have a social or economic problem. Perhaps the answer is “Let’s digitize, and the problem will Automatically resolve”. “
Turkey unexpectedly announced that the representative of the promotion of central bank digital currency is much faster than dozens of other countries that are studying central bank digital currencies, most of which have not yet promised to experiment.
However, Alper Akalın, a founder of the Turkish opposition DEVA, said that Turkey’s digital currency may not be enough to save the country’s miserable currency. Ali Babacan, the main co-founder of DEVA, served as the Minister of Economy of Turkish President Odoğan during the golden years of 2002 and 2013 in Lira. He said:
“Digital currency is exciting, but it is not a saviour that can save the currency’s weak lira.”
Although Bitcoin advocates regard Bitcoin as a hedging tool against the central bank on the grounds that it has the characteristics of decentralization and limiting supply, Alper Akalın said that the central bank’s digital currency is different, and Turkey may accept this digital currency from the government. Jurisdiction, and the Turkish government tightly controls the central bank, leaving the lira in trouble. He said:
“The Turkish government’s record of unconventional practices of freely determining monetary policy is bound to be unable to support its central bank’s digital currency. Therefore, this currency will be like a miserable lira.”
Recently, more and more countries are discussing central bank digital currencies, and Turkey is one of them. According to a report by the Bank for International Settlements (BIS) at the beginning of the year, as many as 80% of countries are discussing central bank digital currency technology.
However, so far only a few countries have taken concrete actions to implement the adoption of central bank digital currencies. One of them is the Bahamas, an island country with a population of 385,000, which launched the “Sand Dollar” in October. On the other hand, the People’s Bank of China, which is experimenting with digital renminbi, processed digital renminbi transactions worth 1.1 billion yuan in the same month. Turkey only began to study central bank digital currencies a month later.
Even so, the Turkish people are not unfamiliar with blockchain and cryptocurrencies. The reason is that the soaring inflation rate drives the Turkish people to switch to cryptocurrencies to protect the value of deposits. However, Paypal, a payment tool platform that supports Bitcoin, is still banned in Turkey, and Paypal lost its license to operate in Turkey in 2016.
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