Cambodia’s digital currency can show other central banks the way

Perhaps in the near future we will hear a lot more about Bakong – this is a digital currency issued by the Central Bank of Cambodia, which just last week was awarded one of the outstanding products and services by the Nikkei (Japan) newspaper 2021.

In October 2020, the National Bank of Cambodia was one of the first central banks in the world to issue a national digital currency operating on a blockchain platform. Cambodians do not need a bank account to use Bakong, they just need to download the Bakong application on their mobile phone to top up money, spend in stores or transfer money to relatives. In addition, thanks to the cooperation system between the National Bank of Cambodia and domestic banks, people can also use commercial bank applications to conduct business in Bakong.

As of November 2021, this digital currency has reached 7.9 million Cambodians, or almost half of the country’s population, currently 16.7 million people. A total of 6.8 million transactions worth around US$2.9 billion were made via Bakong. The Bakong application alone has been downloaded and installed on mobile phones by 270,000 people. Users can scan the QR code or enter the recipient’s phone number to transfer money directly in the application.

In an interview with Nikkei, National Bank of Cambodia Director-General Chea Serey said Bakong helps create interaction between many different objects in the financial system, making electronic payments easier and more efficient. Ms Serey also highlighted the factor that bridges the gap between city dwellers who have a bank account and rural dwellers who have never banked, thus creating social cohesion.

According to the World Bank, as of 2017 data, only 22% of Cambodia’s adult population has a bank account or mobile payment account. That is the basis for the country’s central bank to quickly catch up with a new trend – issuing a blockchain-based digital currency to make it easier for people to access financial services. Nikkei reported that the National Bank of Cambodia has partnered with Japanese blockchain technology company Soramitsu to develop the Bakong coin, named after an ancient temple in Cambodia.

The National Bank of Cambodia is also working with foreign financial institutions to expand the use of Bakong.

In August 2021, this bank signed a cooperation agreement with Commercial Bank of Malaysia (Malayan Banking) to set up a cross-border remittance channel through Bakong.

Currently, in Cambodia, the US dollar is still widely used alongside the riel, especially in large value transactions. Therefore, the central bank of this country hopes that the Bakong proposal will encourage people to use the riel more and more, reduce dependence on the US dollar, and thereby improve the effectiveness of monetary policy.

The central banks of many countries are working to issue their own digital currencies. According to a survey by the Bank for International Settlements in early 2021, up to 86% of the 65 central banks surveyed said they were at various stages in the issuance process of such a coin.

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