Case Study of Cambodia
Bakong, the digital currency of Cambodia was launched in October 2020 by the National Bank of Cambodia. The adoption of digital currency is a step forward in de-dollarizing the economy of Cambodia. Currently, there are almost 200 thousand users’ for the digital wallet and around 5.9 million have benefitted by using the banking apps connected to the system. The digital currency was developed using the Hyperledger Iroha blockchain technology by the Japanese company Soramitsu. The system enables to reduce the interbank cost by unifying the banking process. It enables users to make payments using their Khmer riel or dollar reserves. The use of blockchain technology, due diligence and other security measures adopted by financial institutions improves resilience against the threats of cyber attacks.
Bakong system does not depend on mining for finalizing transactions like the permissionless blockchains instead uses voting method. The payment gateways are controlled by the financial institutions whereas the control of the core system remains with the National Board of Cambodia. Bakong encourages more customer inclusivity with easy to use digital tools and absence of transaction cost. The payment system makes the process simple and the permanent digital record helps in the easy audit of transactions.
The system is entirely fiat-backed and it is what makes it contrasting to the usual central bank digital currency projects. It also resolves the issues of interconnectivity and interoperability since all the users are operating on the same platform. Financial inclusion was a major issue faced by Cambodia and about 78% of the population was unbanked. Introduction of the digital wallet enables to empower the population with an option to pay digitally which will also aid in the economic growth of Cambodia. The capacity of advance technologies in the digital currencies such as Bakong enables to improve the financial system. Bakong is an epitome of a perfect solution on how a digital currency could help to strengthen the local currency.
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