Cambodia’s Central Bank Governor, Chea Serey, recently disclosed the potential of the Central Bank Digital Currency (CBDC) Bakong in boosting the adoption of Cambodia’s local currency, the Riel. Despite over 80% of the country’s economy relying on the US dollar within a dual-currency system, there is a push by the government to encourage the use of the Riel for local transactions.
Chea Serey discussed the evolving dynamics of Cambodia’s currency system at the Nikkei Future of Asia conference. While the US dollar dominates physical transactions, the Riel is favored in digital payments. Since the introduction of Bakong in 2020, it has facilitated an impressive $70 billion in digital payments, double the country’s GDP.
One of the key features of Bakong is its ability to facilitate cross-border QR payments, making transactions easier between Cambodia and neighboring countries like Thailand, Laos, and Vietnam. The exclusive use of the Riel in these cross-border transactions underscores the importance of promoting the local currency for international trade.
Unlike other CBDCs, Bakong is backed by both the Cambodian Riel and the US dollar. This dual support system provides stability and broad usability within Cambodia’s unique dual-currency environment, enhancing the efficiency of transactions and financial integration.
Cambodia is not alone in exploring CBDC to strengthen its fiat currency. Countries like Hong Kong and South Korea are also venturing into CBDC projects to enhance their financial systems. The collaboration with technologically advanced countries like Japan could bring in valuable expertise to improve Bakong’s functionality and appeal.
Chea Serey revealed plans to launch cross-border payments using Bakong CBDC with India and is exploring potential collaboration with Japan. These partnerships aim to enhance the payment system’s efficiency, security, and user experience, making the Riel more attractive to both domestic and international users.
Overall, Cambodia’s Central Bank Digital Currency Bakong presents a promising opportunity to boost the adoption of the Riel and enhance financial integration within the country and beyond. The evolution of the currency system and the focus on cross-border payments demonstrate Cambodia’s commitment to embracing financial innovation for economic growth.
