How to draw inspiration from cryptocurrency technologies to strengthen payment systems and traditional currencies? In recent months, the major central banks have embarked on a race for innovation on the subject. Some of the most successful projects are now being carried out in emerging or middle-income countries – such as China, which is already experimenting with a digital yuan, or Cambodia. “Paradoxically, having a young and still underdeveloped financial system allows us to test things while taking less risk than in countries where it is already very efficient and integrated”, summarizes Serey Chea, Managing Director of the National Bank of Cambodia (BNC).
In October 2020, after a test phase and four years of work, the country launched the bakong system, a blockchain-based mobile payment system, this technology for validating and listing transactions, on which bitcoin is also based. The bakong, whose name is inspired by an Angkor temple, comes in the form of a mobile application that functions as a digital wallet.
A sovereignty issue
It allows you to transfer money simply and instantly, including for people without a bank account, and to make payments by scanning QR codes. “Our goal is for this platform to help strengthen financial inclusion and reduce social inequalities, because very few people have a bank account in the countryside”, says Serey Chea. However, more than 75% of Cambodia’s population, or 16.4 million inhabitants, live in rural areas.
The bakong is therefore a payment system that the BNC has developed with a Japanese start-up, Soramitsu, in partnership with the country’s financial institutions. The aim is also to develop interoperability between them, which has hitherto been limited. The bakong allows Cambodians to transfer sums in riel, the local currency, or in dollars. Because the Cambodian economy is strongly “dollarized”: the greenback represents nearly 70% of the currency in circulation in the kingdom.
Thai baht, Laotian kip and Vietnamese dong are widely used in border areas
This is due to history: in the early 1990s, when the country was under provisional administration by the United Nations, inflation was soaring, and Cambodians overwhelmingly turned to the American currency, in which they had much more confidence. Even today, they make a large part of their daily purchases in dollars, and in cash.
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