In a recent interview at the Nikkei’s Future of Asia conference, Central Bank Governor Chea Serey discussed the potential impact of the Central Bank Digital Currency (CBDC) Bakong on Cambodia’s economy. She revealed that the Bakong could increase the adoption of Cambodia’s Riel currency by facilitating cross-border QR payments, potentially transforming the country’s currency system.
Currently, over 80% of Cambodia’s economy relies on the U.S. dollar as part of a dual-currency system. While the government is making efforts to encourage the use of the Riel for local transactions, the US dollar still dominates physical transactions in the country. However, when it comes to digital transactions, the Riel is more commonly used, showing a shift in consumer behavior towards digital payments.
Since its launch in 2020, the Bakong CBDC has facilitated a total of $70 billion in digital payments, which is roughly double the country’s GDP. Domestic transactions using the Bakong CBDC can be conducted in both Riel and dollars, with the Riel accounting for a significant portion of the total transaction value. Cross-border transactions play a crucial role in promoting the use of the Riel, with QR code-based payments between Cambodia, Thailand, Laos, Vietnam, and China’s UnionPay exclusively using the Riel as the currency.
One of the key features that sets Bakong apart from other CBDCs is that it is backed by both the Cambodian Riel and the US dollar. This dual support provides stability and broad usability within Cambodia’s unique dual-currency system, making transactions smoother and promoting financial integration. This approach aligns with other countries, such as Hong Kong and South Korea, who are also exploring CBDCs to strengthen their fiat currencies.
Looking ahead, Chea Serey revealed plans to launch cross-border payments using Bakong CBDC with India as early as June 2024, while also exploring potential collaborations with Japan. By working with technologically advanced countries like Japan, Cambodia aims to enhance Bakong’s functionality and appeal, improving efficiency, security, and user experience to attract domestic and international users.
The Central Bank Digital Currency Bakong has the potential to revolutionize Cambodia’s economy by increasing the adoption of the Riel and promoting financial inclusivity through cross-border payments. As Cambodia continues to explore collaborations and expand the usability of Bakong, the country is poised to strengthen its position in the digital payments landscape and enhance its economic growth.
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