Turkey Advances Digital Lira to Live Sandbox: Programmable Payments Among Five Categories

Turkey’s central bank cleared 23 private-sector projects Monday to begin live sandbox development of the digital Turkish lira, capping a competitive selection process that drew 85 applications from banks and payment institutions — and advancing the country into a stage of central bank digital currency testing that the United States has now legislatively prohibited itself from reaching.

The Central Bank of the Republic of Türkiye (TCMB) announced the Phase 3 advancement, confirming that 12 banks and 6 payment and electronic money institutions had projects approved to enter development activities and controlled sandbox testing across five distinct use-case categories. An additional six projects were placed on hold for potential future inclusion, while the remaining applicants from the initial pool were not selected.

The path to Phase 3 is unlike how most central banks approach digital currency development. Where many programs are driven by a central bank selecting technology partners and directing the technical architecture, Turkey’s TCMB structured Phase 2 as an open call to the private sector: build us something new.

How Turkey Built a CBDC Through Competition

The process ran in three stages. The initial application window, open from September 4 to October 15, 2025, drew 85 project submissions from across Turkey’s licensed banking and payments sector. Banks, payment institutions, and electronic money institutions could apply, and could bring fintech companies along as partners — meaning technology firms ineligible to apply on their own could still participate through collaboration. The TCMB evaluated those 85 projects against a published set of criteria: originality and innovation, user-centricity, testability, regulatory compliance, and compatibility with the design principles established in the Phase 1 Evaluation Report.

Fifty-one projects cleared Stage 1. Those applicants then submitted detailed documentation and presentations during a second application window that ran from November 13 through December 12, 2025. Stage 2 assessments completed Monday with the final selection: 23 projects advance; 6 are held; the rest are out.

The TCMB confirmed that a single project can qualify under multiple categories. The resulting distribution — 17 projects covering programmable payments, 15 covering tokenization, 15 covering interoperability, 7 covering user-sovereign identity, and 1 covering machine-to-machine payments — reflects a deliberate spread across the five use cases the central bank originally defined as its areas of interest.

What Programmable Money Means Here — and Why the Architecture Matters

“Programmable payments” is the largest category by project count for a specific architectural reason: it is where the TCMB’s most distinctive design choice lives.

Most programmable payment systems embed spending conditions directly into the currency token itself. This creates a risk: a coding error in a smart contract can corrupt the token’s behavior, potentially affecting fungibility — the basic property that makes money interchangeable. The TCMB chose a different approach. As described in its published design principles, the digital Turkish lira will operate on a “separate layer of programmability,” distinct from the currency layer itself. Smart contracts and conditional payment logic run on that separate layer; the currency layer remains clean.

The second architectural distinction is who gets to build on the programmability layer. In a purely central-bank-controlled design, only the central bank can write smart payment flows. The TCMB’s model allows public institutions and private licensed actors alike to develop and deploy programmable payment logic — a federated architecture that, in theory, enables the kind of distributed financial innovation that centralized systems cannot. Whether this architecture will function as described in live sandbox conditions is what Phase 3 will test.

Programmable money at the consumer level means conditional payment logic: a government subsidy that can only be used for approved purposes, a school lunch program that can only be spent at approved vendors, an automatic recurring payment that executes when a smart meter reads a threshold. The 17 Phase 3 projects will stress-test whether these scenarios work on Turkey’s infrastructure — and at what performance cost.

Tokenization, Interoperability, and the Securities Market

The 15 tokenization projects point toward an ambition that goes significantly further than digital cash. The TCMB has separately confirmed it is determining technical requirements for tokenized securities exchange using the digital lira — meaning that equities, bonds, or other financial instruments could eventually be represented as digital tokens and settled in digital lira in a single, atomic transaction.

Tokenization changes the economics of securities settlement. Today’s system involves a chain of custodians, clearinghouses, and settlement banks that process transactions over hours or days while managing the credit risk that one counterparty might not deliver. Atomic settlement — where a digital security and its payment move simultaneously in a single transaction — eliminates that settlement lag and the credit risk it creates. The TCMB’s 15 tokenization projects, combined with its stated technical requirements work for securities exchange, indicate it is building toward that outcome. Whether the regulatory framework will be ready when the technology is remains an open question.

The 15 interoperability projects address the integration problem every CBDC eventually faces: how does a new digital currency work alongside existing payment rails rather than replacing them? The TCMB has explicitly designed the digital lira to operate in parallel with FAST — Turkey’s equivalent of the US ACH system — rather than as a successor to it. Conversion between digital lira and conventional bank money through FAST is built into the architecture. The 15 interoperability projects will test exactly how that coexistence works in practice.

Machine-to-Machine Payments: Turkey’s Forward Bet

The single machine-to-machine payment project is worth specific attention precisely because of how rare it is.

Every other major CBDC pilot has focused on human-initiated transactions: a person paying a merchant, a government disbursing a subsidy, a bank settling an interbank transfer. Machine-to-machine (M2M) payment scenarios involve no human action: an autonomous vehicle paying a charging station, an industrial sensor paying a data provider, a smart meter settling an energy bill in real time. IMF programmable payments research has identified M2M scenarios as among the most consequential potential applications of programmable CBDC infrastructure — and among the least tested.

No major central bank has yet demonstrated M2M payments at meaningful scale in a live CBDC environment. Turkey’s single Phase 3 project in this category does not change that — one sandbox project is not a deployment — but it places Turkey ahead of most comparable programs in at least asking the question. What the TCMB is testing here is whether its programmability layer’s architecture can handle transactions that must complete in milliseconds, at high volume, without human review or approval at the point of execution.

If the architecture holds under M2M conditions, the same infrastructure that pays for autonomous vehicle charging can enforce programmable payment rules for industrial supply chains, IoT device networks, and any scenario where machines transact with machines. The implications for financial infrastructure extend well beyond retail digital currency.

Who Actually Built the Infrastructure

The technical foundation under Phase 3 was not built by a payments company or a fintech. The “Digital Turkish Lira Collaboration Platform” — established in 2021 via formal memorandums of understanding — was built primarily by Aselsan and Havelsan, with participation from TÜBİTAK (Turkey’s Scientific and Technological Research Council). These roles are confirmed in both the TCMB Phase 1 Evaluation Report and independent reporting on the ecosystem call.

Aselsan and Havelsan are not financial technology companies. They are Turkey’s primary defense electronics contractors — Aselsan is among NATO’s 50 largest defense suppliers, and Havelsan develops military command, control, and communications systems. Both operate software and IT divisions, but their primary domain is defense.

The decision to build monetary infrastructure on a defense-company foundation is architecturally unusual. It signals two things: that Turkey’s government treated the CBDC platform as a matter of national strategic infrastructure — not a commercial payments product — and that it had greater confidence in its defense sector’s ability to build secure, sovereign technology than in its commercial fintech sector’s ability to do so from scratch. TÜBİTAK’s involvement extends this pattern: Turkey’s national research council, not a consortium of banks, co-built the CBDC’s technical platform.

The 23 Phase 3 projects will now layer on top of this foundation — private-sector innovation building on government-built infrastructure, rather than the reverse.

The International Dimension: UAE, Cross-Border Payments, and a Diverging World

Turkey’s Phase 3 announcement arrives against a backdrop of diverging global CBDC trajectories that has intensified in 2026.

In October 2025, the TCMB and the Central Bank of the United Arab Emirates signed formal agreements exchanging expertise in developing CBDC platforms for individuals and institutions — part of a broader financial cooperation package that also included the integration of Turkey’s FAST instant payment system with the UAE’s Aani instant payment platform. The bilateral coordination reflects a broader pattern among emerging-market central banks of building CBDC interoperability frameworks before individual retail CBDCs are fully launched — establishing the cross-border plumbing now so it exists when the currency is ready.

More than 130 governments are now developing or assessing CBDCs, with many having moved from research into system design, testing, and legal frameworks, according to the Atlantic Council CBDC Tracker. Several advanced economies have moved in the opposite direction: the US Senate passed a provision banning the Federal Reserve from issuing a digital dollar through 2030, and Canada, Australia, and Norway have deprioritized retail CBDC programs, as covered in prior TechTimes CBDC reporting.

Turkey’s trajectory is distinct from both groups. Unlike South Korea — whose Bank of Korea is routing real government subsidy money through a permissioned blockchain this September, representing the most advanced live pilot among comparable economies — Turkey has not yet moved to live public transactions. But Turkey’s structured competitive selection model, published evaluation criteria, and five-category taxonomy represent a methodological approach that no comparable emerging-market CBDC program has yet matched.

What Turkey’s Governance Record Means for Programmable Money

Any article about Turkey’s digital lira that does not address Turkey’s governance record is an incomplete article. The Human Rights Foundation’s CBDC Tracker, which monitors civil liberties implications of CBDC programs globally, classifies Turkey as fully authoritarian on civil liberties grounds. Freedom House gives Turkey a score of 32 out of 100 — in the “Not Free” category — with particularly low scores on rule of law and freedom of movement.

The concern is not theoretical. Turkey’s government has used its financial powers against political actors with documented specificity: the bank accounts that its third-largest parliamentary party used to hold treasury funds were blocked before the 2023 general election. Freedom House reports that in 2021, the government froze the assets of 770 nongovernmental organizations on terrorism financing grounds — grounds that Amnesty International characterized as a pretext for suppressing civil society.

A programmable CBDC with central visibility into financial transactions would amplify exactly these capabilities. Central bank digital currencies, by their architecture, give the issuing authority direct visibility into the full transaction graph — who paid whom, when, for what, and in what amount. In a system where programmable payment logic can be set by the central bank or licensed actors, spending restrictions can be embedded into the currency itself. China’s digital yuan pilot has already demonstrated the practical implementation: digital yuan vouchers distributed in Shenzhen were programmed with expiration dates, creating spending pressure that conventional cash cannot enforce.

The TCMB’s design choices include explicit guardrails that address some of these concerns: the digital lira is designed as optional rather than mandatory, offline capable, and usable without a bank account — features that reduce coercive leverage by ensuring alternatives exist. Whether those design commitments survive political pressure after launch is a question no technical architecture can answer.

What “User-Sovereign Identity” Actually Means — and Why the Label Is Contested

Seven of the 23 Phase 3 projects cover “user-sovereign identity” — a category that requires unpacking, because it names a contested architectural distinction.

Genuine self-sovereign identity (SSI) is a specific technical approach in which individuals control their own credentials and can selectively disclose attributes — proving, for example, that they are over 18 without revealing their name, address, or identity document number. In a CBDC context, this approach would allow a user to prove they are a licensed account holder without the central bank or any intermediary knowing their underlying identity for every transaction.

The alternative is a system that uses the SSI label while routing identity verification through a government-issued digital ID or a biometric check — preserving the appearance of user control while maintaining centralized identity visibility.

Turkey already has a national digital ID system. The TCMB noted in December 2022 that “studies on the legal dimension show that digital identification is of critical importance” to the CBDC project, and its 2023 Presidential Annual Program stated that integration of a CBDC with “identity” and the FAST payment system was a research objective. Both references were documented by Global Government Finance in its reporting on the ecosystem call.

Which approach the seven Phase 3 SSI projects will actually implement — genuine attribute-based privacy-preserving verification, or government-ID-integrated “user-sovereign” labeling — is not determined by the TCMB’s current announcement. Phase 3 sandbox testing is where that architectural question will start to receive concrete answers.

What Comes Next

The 23 Phase 3 projects will now move into active development and sandbox testing, with the TCMB overseeing the process. The central bank confirmed it will continue advancing public-private cooperation in financial technologies and the digital Turkish lira. The six projects on hold may re-enter the process at a later stage.

No public launch timeline has been announced. The TCMB is still determining technical requirements for the exchange of securities using the digital lira and drawing up regulatory frameworks in parallel with the technical pilot work — meaning legal and regulatory infrastructure is still under construction alongside the technology itself, as described in the TCMB blog on CBDC design.

What Phase 3 will produce is a set of concrete answers to questions that CBDC planners everywhere are asking: Can a federated programmability layer deliver the innovation it promises without introducing the security vulnerabilities that a centralized smart contract layer avoids? Can machine-to-machine payments clear the latency and throughput requirements of real industrial IoT environments? Can a user-sovereign identity system deliver genuine privacy while satisfying the anti-money-laundering and know-your-customer requirements that regulators will demand before any CBDC enters public use?

Turkey’s answers will reach the CBDC policy community before most comparable programs have finished asking the questions.

Frequently Asked QuestionsWhat is Turkey’s digital lira, and how is it different from the digital dollar the US banned?

The digital Turkish lira is a central bank digital currency — a digital form of legal tender issued and controlled by the Central Bank of the Republic of Türkiye (TCMB), not by private companies. It is not a stablecoin or a cryptocurrency. Turkey has been developing it since 2020, completing a proof-of-concept phase, a first pilot phase with payment transactions in 2022, and now advancing 23 private-sector projects into live sandbox development. The key architectural difference from what the US Senate banned is institutional: the US prohibited the Federal Reserve from issuing a digital asset that is a direct Fed liability and widely available to the public. Turkey’s TCMB, facing no such legislative constraint, has continued building and has now moved to live testing. The digital lira is also designed for optional, not mandatory use, and is intended to operate alongside existing electronic payment systems rather than replace cash.

What does “programmable payments” mean, and should ordinary users be concerned about it?

Programmable payments means money that can carry conditional spending logic — rules built into the payment itself that determine when, where, and for what the money can be used. Examples range from the benign (a government subsidy that automatically expires if unused, or a school lunch account restricted to approved cafeteria vendors) to the coercive (money that cannot be spent on certain goods, or that expires to force rapid spending). Turkey’s TCMB has designed programmability as a separate layer from the currency itself, so that errors in smart contract code do not corrupt the underlying digital lira — a more cautious design than embedding conditions directly into tokens. The 17 programmable payments projects entering Phase 3 sandbox will test whether this design works in practice. For ordinary users, the key question is who controls the programmability layer and under what legal constraints — a question Turkey’s still-developing legal framework has not yet definitively answered.

What are the privacy and civil liberties risks of a CBDC in a country classified as authoritarian?

The Human Rights Foundation’s CBDC Tracker classifies Turkey as “Fully Authoritarian,” and this classification is relevant to how the digital lira’s capabilities could be used. Central bank digital currencies give the issuing authority visibility into transactions at a level that physical cash does not permit. In Turkey’s documented governance record, this is not an abstract concern: the government blocked opposition party bank accounts before the 2023 elections and froze assets of hundreds of NGOs under terrorism financing claims that international human rights organizations disputed. A programmable CBDC with central visibility would amplify these financial enforcement capabilities. The TCMB’s design choices — optional use, no bank account required, offline capability — reduce some coercive leverage by ensuring cash and non-CBDC alternatives remain available. Whether those design commitments are maintained as Turkey’s political environment evolves is a question that no technical architecture can guarantee.

What is the “user-sovereign identity” category, and is it actually privacy-preserving?

“User-sovereign identity” refers to a technical approach in which individuals control their own identity credentials and can selectively disclose attributes — proving they are over 18, for example, without revealing their full identity — rather than submitting a government-issued document that a central authority can read and record. Seven of the 23 Phase 3 projects cover this category. Whether they will implement genuine attribute-based, privacy-preserving verification — or a system that uses the “user-sovereign” label while routing verification through Turkey’s national digital ID infrastructure — is not determined by Monday’s announcement. Turkey’s central bank has previously noted that “digital identification is of critical importance” to the CBDC project, and integration with its existing national ID system is a stated research objective. Phase 3 sandbox testing is where the practical distinction between these two architecturally opposite approaches will start to become visible.