Digital Currency to Drive Increased Use of Cambodia’s Fiat, Says Central Bank Governor
The Central Bank Governor of Cambodia, Chea Serey, recently discussed how the Central Bank Digital Currency (CBDC) Bakong could boost the adoption of Cambodia’s local currency, the Riel, by facilitating cross-border QR payments. In an interview at Nikkei’s Future of Asia conference in Tokyo, Serey highlighted that while the US dollar dominates physical transactions in Cambodia, the Riel is widely used in digital transactions.
Since its launch in 2020, the Bakong CBDC has seen significant growth in usage, facilitating a total of $70 billion in digital payments as of 2023, which is roughly double the country’s GDP. Of this total, $20 billion was accounted for by Riel transactions, more than doubling the value from 2022.
Serey emphasized the importance of cross-border transactions in promoting the use of the Riel. Bakong’s functionality extends to QR code-based payments between Cambodia, Thailand, Laos, Vietnam, and transactions involving China’s UnionPay. These cross-border payments exclusively use the Riel, requiring Cambodian citizens to have a Riel Bakong account for transactions with neighboring countries. Similarly, Thai tourists can only make QR code transactions in Cambodia if merchants accept the Riel.
What sets Bakong apart from other CBDCs is its dual backing by the Cambodian Riel and the US dollar. This dual support provides stability and broad usability within Cambodia’s unique dual-currency system, enabling smoother transactions and financial integration.
Cambodia is not alone in exploring CBDCs to strengthen its fiat currency. Hong Kong’s central bank launched a wholesale CBDC in March 2024 to enhance tokenization and the city’s financial strength. Additionally, the South Korean central bank is accelerating its CBDC project to test the digital Korean won (KRW) by the last quarter of 2024, focusing on usability and deposit functions.
Looking ahead, Cambodia’s central bank governor plans to initiate cross-border payments using Bakong CBDC with India as early as June 2024 and is exploring collaboration with Japan. This collaboration could bring technical expertise and innovation, further enhancing Bakong’s functionality and appeal. Ultimately, these efforts aim to improve the payment system’s efficiency, security, and user experience, making the Riel more attractive to domestic and international users.
