As reported by local news outlet bnext.com on Wednesday, Chin-long Yang, governor of the Central Bank of the Republic of China (Taiwan), recommended a no-interest design for the country's central bank digital currency, or CBDC, pilot. In explaining the decision, Yang said that a CBDC where interest is paid on digital asset deposits would likely become a replacement for fiat New Taiwan dollar (NT$) deposits in banks. "Once the banks' available deposits decrease," Yang explained, "it would lead to a corresponding increase in the cost of financing and thereby increase the cost of borrowing for consumers."
Yang further warned that even interest-free CBDCs could lead to "digital bank runs" during times of financial instability and quickly spiral into a liquidity crisis for financial institutions. But nevertheless, the country's central bank governor recognized a surge in demand for electronic payment solutions in recent years: