Cambodia explores cross-border transactions of CBDC-like Bakong

The National Bank of Cambodia (NBC) continues progressing with its central bank digital currency-like initiative known as Bakong, disclosing several project milestones.

NBC’s director-general and the Bakong project lead Chea Serey said in a Wednesday interview with The Nikkei that Bakong’s electronic wallet reached 200,000 users in June, doubling from three months earlier. Based on blockchain technology, the Bakong payment and money transfer service was originally launched by NBC in October 2020.

The digital money project has amassed nearly 6 million users in the first half of 2021, including those reached indirectly through member bank mobile apps, recording a total of 1.4 million transactions worth nearly $500 million, Serey noted.

The official disclosed that the NBC is currently exploring cross-border transactions through Bakong, closely working with Thailand’s central bank and Malaysia’s largest bank, Maybank. Serey explained that the cross-border Bakong transactions would provide Cambodian people in foreign countries with a “safe and efficient way to send money to their families.” She noted that the new payment method would be beneficial for many Cambodian women migrating to Malaysia.

Serey also reportedly said that Bakong’s launch has significantly increased the use of Cambodia’s national currency riel, which is part of the country’s dual-currency system alongside the United States dollar. However, the digital money project alone will not be able to switch Cambodia from a U.S. dollar-based economy to the riel, she added.

“There are other policies that need to be in place, like having a stable exchange rate and inflation rate,” Serey stated, concluding that the mission of Bakong is to “increase the usage of the local currency,” with the long-term goal to “solely use” the country’s local currency. According to data by Wall Street Journal, the U.S. dollar is currently used for 90% of financial transactions in Cambodia.

Related: France and Singapore pilot cross-border CBDC transactions

Additionally, the NBC director-general expressed a skeptical stance on Bitcoin (BTC), the world’s most-valued cryptocurrency. Serey said that the crypto industry needs regulation and consumer protection measures to avoid the consequences of volatile prices, stating: “There are no fundamentals and if you were to allow investors to go into this… Who is going to take responsibility when the price crashes?”

Developed by NBC in collaboration with Japanese blockchain technology company Soramitsu, Bakong allows Cambodian citizens to pay at stores or send money through a mobile app, supporting settlements and remittances in the riel or U.S. dollars. At the project’s launch, Serey emphasized that Bakong should not be referred to as a CBDC but rather a payment and money transfer service.