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Turkey’s Current Account Gap Better Than Expected as ECB Moves Toward Digital Euro

The European Central Bank’s (ECB) decision to set up a digital euro pilot marks a key moment for the euro’s latest incarnation to demonstrate its value and relevance in the changing financial landscape.

The European Central Bank (ECB) decided on Wednesday to establish a pilot program to launch a digital currency for the 20 countries that use the common currency, making it the first heavyweight Western central bank to formally advance what could become a global blueprint.

Proponents say the CBDC will modernize payments with new features and provide an alternative to physical cash, which appears to be in decline.

But questions remain: why countries that have adopted CBDCs, such as Nigeria, have had low adoption rates, while the ECB’s plan has been met with protests, suggesting public concern about snooping.

Commercial banks are concerned about the costs and potential loss of deposits when customers transfer funds to central bank accounts, while developing countries fear that easily accessible digital dollars, euros or yuan could wreak havoc on their systems.

Turkey’s Current Account Gap Better Than Expected as ECB Moves Toward Digital Euro

Central bank digital currency centers have had mixed results so far

Several countries have launched central bank digital currencies (CBDCs). China is experimenting with a yuan prototype with 200 million users, India is preparing a pilot, and some 130 countries (98% of the global economy) are exploring digital cash.

So far, however, the results have been mixed. The Bahamas launched the world’s first digital currency in 2020, but in the first seven months of the year, individual transactions of its SandDollar fell by 11%, while wallet top-ups plummeted fourfold.

A May document from the International Monetary Fund (IMF) said public adoption of the electronic naira in Nigeria was “disappointingly low”, with 98.5 percent of wallets never even used.

Defining a global standard

The ECB’s program could begin to define a global standard for CBDCs, as the technology chosen by the ECB and India could be emulated by other countries.

The International Monetary Fund is also helping dozens of countries develop CBDC programs and will soon issue operational guidelines. It is building what it calls the XC platform, designed to process or “settle” CBDC transactions.

Top Issues

The Atlantic Council’s Josh Lipsky says the overriding issue in developing CBDCs is how to improve the financial system.

“That’s really the key,” he said.

Turkey.

The article also mentions that Turkey’s current account gap was better than expected. This is a positive development for the Turkish economy as it shows that the country exports more goods and services than it imports.

All in all, this article provides a good overview of the latest developments in the CBDC space as well as the challenges and opportunities ahead.

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