South Asian nation Cambodia is looking to replace the use of the US dollar, starting with its “Bakong”, central bank digital currency. The bet on CBDCs in Cambodia was made in lieu to later adopt the use of its own currency, the Riel in the country, and gradually shift away from the use of the U.S. dollar.
Cambodia’s dual-currency system has been in place since the 1980s and 90s when the dollarization started in the South Asian region and embedded itself in the financial eco-system following the civil war and economic disparities. Where the dollar helped reconstruct and strengthen the developing economic sphere of Cambodia; now, the country is looking to “wean off that dependence” as Cambodia’s economy grows.
“Bakong started sort of as a willingness to connect up the fragmented payment systems in Cambodia.”, NBC’s director-general, Chea Serey, who leads the project, told Nikkei Asia.
CBDCs alone cannot replace USD
However, the Cambodian government states that mere CBDC adoption cannot completely replace the use of Dollars in the country. The use of Cambodia’s local currency, the Riel has increased after introducing CBDCs in 2020, but it still has not taken over the globally dominant US Dollar. Cambodia’s authorities emphasized that the aim of ‘Bakong’ is to “increase the usage of the local currency,” with the long-term goal to “solely use our local currency.”. Nevertheless, the authorities do not promote the process as “de-dollarization” to prevent any unceremonious collapse of global investors in the country.
“There are other policies that need to be in place, like having a stable exchange rate and inflation rate, as well as [economic] growth prospects,”, said Serey.
Bakong’s Cross-Border transactions
The Nation Bank of Cambodia is seeking to expand Its CBDC, i.e., Bakong’s reach into the global sphere through allowing cross-border transactions. Currently, the country is collaborating with Malaysia’s Maybank as well as Thailand’s central bank, as Cambodian women migrate to the following countries in search of work.
The Cambodian authorities highlight Bakong as “a safe and efficient way to send money to their families.” and empower the women of the country as it allows them to “be able to manage [their] own finances without dependence on a third party.”
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