The Digital Lira Pilot: Inside Turkey's CBDC Experiment

The Turkiye Cumhuriyet Merkez Bankasi confirmed in a statement on 4 August 2025 that it had commenced "limited-scope, closed-environment testing" of a digital Turkish lira with the participation of five banks: Ziraat Bankasi, Halkbank, Vakifbank, Is Bankasi, and Garanti BBVA. The statement, published on the TCMB's website in both Turkish and English, was characteristically spare. It described the pilot as "Phase 1 of the Digital Turkish Lira Research and Development Project," noted that it would involve "simulated transactions between participating institutions using a distributed ledger infrastructure," and stated that no retail customers would be involved at this stage. The TCMB emphasised that the pilot "does not constitute a decision to issue a digital Turkish lira" and that "further phases, if any, will be determined based on the outcomes of the current testing period." The hedging language is deliberate and, for anyone who has followed the TCMB's communications over the past two years, familiar. The central bank is moving forward, but it wants everyone to know that it reserves the right to stop.

The origins of the digital lira project trace back to late 2021, when the TCMB established a dedicated CBDC research unit within its Payment Systems Department. The unit, initially staffed with six researchers and two technology consultants, was tasked with studying international CBDC developments and assessing their relevance to Turkey. A preliminary report published in December 2022 surveyed the landscape: China's e-CNY pilot, then already processing billions of yuan in transactions across multiple cities; the European Central Bank's investigation phase for a digital euro; the Bank of England's ongoing consultation on a digital pound; and Brazil's Drex pilot, which had attracted attention for its emphasis on programmable payments. The TCMB's report concluded, with characteristic caution, that "a digital Turkish lira could complement the existing payment infrastructure and support financial inclusion objectives, provided that design choices are made carefully regarding privacy, interoperability, and monetary policy transmission." By mid-2023, the research unit had grown to 14 people and had begun technical development work, building a proof-of-concept platform based on a permissioned distributed ledger architecture. The choice of technology, while not explicitly named in any public TCMB document, is understood from industry sources to be a modified version of the Hyperledger Fabric framework, similar to the infrastructure used by the Banque de France in its own CBDC experiments.

The Phase 1 pilot is deliberately narrow in scope. The five participating banks are conducting simulated wholesale transactions, testing the platform's ability to process interbank transfers, settle securities transactions, and execute basic smart contract logic. No actual Turkish lira are being created or destroyed; the pilot operates entirely in a sandbox environment with synthetic balances. The transaction volumes are small, the scenarios are scripted, and the primary objective is technical validation rather than economic experimentation. This is, in essence, a stress test of the plumbing. Can the distributed ledger handle the transaction throughput that a Turkish payment system would require? Can the consensus mechanism achieve finality within the latency tolerances that real-time settlement demands? Can the system integrate with existing TCMB infrastructure, including the EFT real-time gross settlement system and the FAST instant payment network? These are engineering questions, not policy questions, and the TCMB appears to be answering them methodically before moving to the harder decisions about retail design, privacy architecture, and monetary policy implications.

The implications for Turkey's electronic money and fintech sector are significant, even at this early stage. If the TCMB eventually issues a retail digital lira, available directly to consumers through wallets provided by banks and possibly by licensed non-bank institutions, the competitive landscape for domestic payments would shift fundamentally. Turkey's e-money companies, including Papara, Tosla, and the handful of other licensed firms that have built consumer payment businesses, currently compete on the basis of user experience, speed, and cost. A CBDC would introduce a new form of money, one backed by the full faith and credit of the central bank, with zero counterparty risk, that could in principle be held and transferred without any intermediary at all. The question of whether e-money companies would be permitted to distribute digital lira wallets, and under what licensing terms, is one that the TCMB has not yet addressed publicly. The international precedent is mixed: China's e-CNY pilot has included Alipay and WeChat Pay as distribution partners, while the ECB's digital euro proposals have focused on bank-mediated distribution. For Turkey's fintechs, the design choice matters enormously. A digital lira distributed exclusively through banks would reinforce existing market structures. A digital lira open to licensed e-money institutions would create new opportunities, but also new regulatory obligations and potentially new forms of competition with the central bank itself.

It is worth placing the digital lira pilot in the context of Turkey's broader payments modernisation. The TCMB has, over the past five years, built one of the more impressive real-time payment infrastructures in any emerging market. The FAST instant payment system, launched in January 2021, now processes over 15 million transactions daily with a median settlement time of under two seconds. The TR QR code standard, introduced in 2022, has achieved widespread merchant adoption in major cities. The regulatory framework for open banking, implemented through the TCMB's Payment Services Regulation, is creating the conditions for account-to-account payments to compete with card networks. The digital lira, if it eventually moves beyond the pilot phase, would sit on top of this infrastructure rather than replacing it. The TCMB's approach, building from the ground up rather than attempting a single transformative leap, suggests an institution that understands the risks of moving too fast in payments infrastructure. Whether the digital lira ultimately launches as a retail product, remains a wholesale-only tool, or is quietly shelved after the pilot phase concludes, the testing process itself is generating valuable institutional knowledge. Turkey's central bank is learning by doing, and in the fast-moving world of CBDC development, that is a reasonable place to be.