Cambodia is planning to launch a “quasi” central bank digital currency (CBDC) in a matter of months, according to local newspaper Phnom Penh Post. The National Bank of Cambodia partnered with Japanese blockchain firm Soramitsu which built a real-time gross payment system (RTGPS) based on the Hyperledger Iroha distributed ledger technology (DLT).
The primary application of the “Bakong” project is for payments, and its mobile payments app is integrated with eleven banks. The digital wallets are linked to bank accounts, but only 20-30% of the population currently have accounts.
Three months ago we reported that the Bakong system was already processing millions of dollars for retail transactions as part of its test phase.
“Our industry is relatively immature in terms of the number of service providers and users. Bakong will eventually create financially inclusive ecosystems that all the stakeholders in the industry can benefit from,” Shin Chang Moo, the President of Phnom Penh Commercial Bank (PPCBank), told the Post.
The central bank’s director-general Chea Serey said it eventually plans to allow cross border payments through the Bakong system. But the payment functionality will support domestic multi-currency payments from the start, based on a website description by blockchain firm Soramitsu.
That’s in part because the local currency, the Riel, is not widely used. As recently as 2017, 84% of transactions were denominated in dollars, according to the Nikkei. Hence the blockchain platform will support both US dollar and Riel transactions. The “quasi” description is because the dollars are held at the central bank.
But cross border payments are important for financial inclusion. Some Cambodian domestic workers in Malaysia spend 10%-30% in transaction fees to send money home. When they remit the money to family, sometimes its also not spent on the appropriate things. Hence, by enabling a cross border peer-to-peer payment system, a worker in Malaysia could pay school fees for her children in Cambodia, for free. That’s the vision the central bank director- general previously shared with CNBC.
A recent survey by the Bank for International Settlements (BIS) found that 80% of central banks are exploring CBDCs, and 10% envisage deploying a digital currency within three years.
Six central banks have decided to collaborate on research. The banks involved are the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank (ECB), the Sveriges Riksbank (Sweden), the Swiss National Bank, as well as the BIS.
Meanwhile, Hong Kong and Thailand recently unveiled the results of their latest collaborative research. Perhaps the most advanced in terms of testing are the Monetary Authority of Singapore and the People’s Bank of China (PBoC). The PBoC is thought to be launching pilots for its DC/EP imminently.