The recent revelations by Central Bank Governor Chea Serey of Cambodia shed light on the potential impact of the Central Bank Digital Currency (CBDC) Bakong on the adoption of the country’s Riel currency. In an exclusive interview at the Nikkei Future of Asia conference in Tokyo, Serey highlighted how the CBDC could facilitate cross-border QR payments and boost the use of the Riel in Cambodia, where over 80% of the economy still relies on the US dollar as part of a dual-currency system.
Since its launch in 2020, the Bakong CBDC has seen significant growth, facilitating a total of $70 billion in digital payments as of 2023, which is double the country’s GDP. While the US dollar dominates physical transactions, the Riel is more commonly used in digital transactions, with $20 billion in Riel transactions recorded in 2023. The functionality of Bakong extends to QR code-based payments between Cambodia and neighboring countries like Thailand, Laos, and Vietnam, as well as transactions involving China’s UnionPay.
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, providing stability and broad usability within Cambodia’s unique dual-currency system. The Central Bank of Cambodia’s exploration of CBDC aligns with a global trend, with other countries like Hong Kong and South Korea also venturing into the space to strengthen their fiat currencies and promote financial integration. In March 2024, the Hong Kong central bank launched a wholesale CBDC, while the South Korean central bank is set to test the digital Korean won by late 2024.
Looking ahead, Cambodia’s Central Bank has plans to initiate Bakong transactions with India as early as June 2024 and is also exploring collaboration with Japan. This potential partnership with technologically advanced countries could bring expertise and innovation to enhance Bakong’s functionality and improve the payment system’s efficiency, security, and user experience. Such collaborations could make the Riel more attractive to both domestic and international users, further promoting the adoption and use of the Cambodian currency.
In conclusion, the Central Bank of Cambodia’s efforts to promote the use of the Riel through initiatives like Bakong are essential for the country’s economic development and financial stability. The CBDC’s potential to facilitate cross-border transactions and enhance the Riel’s usability could help reduce reliance on the US dollar and strengthen Cambodia’s currency system. As the world moves towards digital currencies, Cambodia’s exploration of CBDC sets a precedent for other countries to follow suit in modernizing their financial systems and promoting the adoption of their respective fiat currencies.
