After three years of development, the Cambodian national digital currency may be out later this month, according to a recently released whitepaper.
The permissioned blockchain-based payments system differs from the central bank digital currencies, also known as CBDCs, being offered by several states, including China and Russia, the paper states.
Cambodia Launches “Project Bakong” Blockchain
The Kingdom has taken massive steps in introducing blockchain systems into its economy since the National Bank of Cambodia (NBC) set up a commission to look into distributed ledger technologies (DLTs) in the latter half of 2016. Project Bakong is permissioned, based on the Hyperledger Iroha, a business-oriented DLT platform.
A year later, the commission drafted a solution in different sectors of the economy that a quasi-digital currency may be useful under the auspice of “Project Bakong.”
According to the white paper, the project allows the country to transition from a heavily dollarized financial system to a real-time funds transfer system across the population, offering interbank transfers too.
“The implementation of Bakong would connect all financial institutions and payment service providers under a single payment platform which will allow for fund transfers to be processed on a real-time basis without the need of a centralized clearinghouse.”
Notwithstanding, the platform will also offer Cambodians a P2P platform that allows retail transfers and payment options as quickly as sending an email. The system is mobile-based to ensure reach and accessibility to open up the digital finance ecosystem to Cambodians, lifting them from extreme poverty levels.
‘Not a CBDC’
Despite NBC’s blockchain payment system being compared to CBDCs developed by China, Sweden, and the U.S., Cambodia’s system is quite different. While the CBDCs are developed and issued by the central bank, the quasi-digital currency will need to be “exchanged” for Khmer Riel, the official currency of Cambodia.
The paper describes the development of a blockchain payments system as a detour from the long-running use of the dollar. Given the relatively young population, the turn to digital payment systems may well be the key turning point, with over 5 million citizens already having e-wallets to transact digitally.
The paper states the platform was set to launch in early 2020 but is yet to. NBC announced in the fall of 2019 that the payment system could also take on international payments in the future.