In a recent interview, Central Bank Governor Chea Serey highlighted the ongoing efforts to increase the adoption of Cambodia’s Riel currency through the Central Bank Digital Currency (CBDC) Bakong. Despite the dominance of the U.S. dollar in over 80% of the country’s economy, there is a push to promote the local currency for local transactions. The government is aiming to shift the reliance on the U.S. dollar in physical transactions to a stronger focus on the riel in digital transactions.
Since its launch in 2020, the Bakong CBDC has significantly impacted digital payments in Cambodia. Facilitating a total of $70 billion in digital payments as of 2023, the CBDC has played a crucial role in the country’s financial system. Domestic transactions using Bakong CBDC can be conducted in both riel and dollars, with the riel accounting for a substantial portion of the total transactions. This shift towards the riel in digital payments signifies a gradual move towards the local currency in the digital landscape.
Cross-Border Payments and Riel Promotion
One of the key features of the Bakong CBDC is its functionality in cross-border transactions. The use of QR code-based payments between Cambodia, Thailand, Laos, Vietnam, and China’s UnionPay exclusively in riel promotes the use of the local currency in international transactions. This strategic move aims to increase the visibility and adoption of the riel beyond Cambodia’s borders, enhancing its appeal to a broader audience.
Unlike other CBDCs, the Bakong is backed by both the Cambodian riel and the U.S. dollar. This dual support provides stability and usability within Cambodia’s dual-currency system, making transactions smoother and more integrated. The combination of the two currencies in backing the CBDC sets it apart from other digital currencies, offering a unique value proposition to users within Cambodia’s financial ecosystem.
Looking ahead, Cambodia’s central bank governor has revealed plans to launch cross-border payments using Bakong CBDC with India and explore collaboration with Japan. By partnering with technologically advanced countries, Cambodia can benefit from technical expertise and innovations that enhance Bakong’s functionality and appeal. This collaboration could lead to improvements in the payment system’s efficiency, security, and user experience, making the riel more attractive to both domestic and international users.
The development and adoption of Cambodia’s CBDC Bakong represent a significant step towards promoting the use of the local currency in both domestic and international transactions. With continued efforts to strengthen its digital payment infrastructure and foster collaborations with other countries, Cambodia is paving the way for a more robust and inclusive financial system that enhances the value and utility of the riel.
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