The governor of Cambodia's central bank, Chea Serey, has expressed optimism about the potential of the country's central bank digital currency (CBDC), Bakong, to increase the usage of the Cambodian Riel (KHR). In an interview at the Nikkei's Future of Asia event in Tokyo, Serey highlighted the unique nature of Cambodia's currency system, which is heavily dominated by the U.S. dollar, with over 80% of the economy relying on it.

Bakong CBDC Facilitates Cross-Border Payments

Serey stated that the Bakong CBDC, launched in 2020, has already facilitated $70 billion in digital payments, nearly double Cambodia's GDP. Domestic transactions through Bakong can be conducted in both Riel and U.S. dollars, with the Riel accounting for $20 billion of last year's total, more than twice the value from 2022. The central bank governor emphasized the importance of cross-border transactions in boosting the use of the Riel, as Bakong is used for QR code payments between Cambodia and neighboring countries like Thailand, Laos, and Vietnam, as well as with China's UnionPay.

Dual Currency Backing Ensures Stability

The Bakong CBDC stands out from other CBDCs because it is backed by both the Cambodian Riel and the U.S. dollar. This dual backing ensures stability and generates more extensive applicability within the bi-currency context of Cambodia, enabling large transactions and refining the integration process.

Expanding Cross-Border Payments with India and Japan

Governor Serey revealed plans to launch cross-border payments using Bakong CBDC with India by June 2024 and is also exploring potential collaboration with Japan. She expressed openness to working with other countries that have significant people movement with Cambodia, stating that accessing technology from developed countries like Japan would help improve the Bakong payment system.

Emerging CBDC Trends in Asia

The Bakong CBDC's success aligns with broader trends in Asia, as Hong Kong's central bank recently launched a wholesale CBDC to strengthen the city's financial system, and the South Korean central bank plans to test the digital Korean Won (KRW) by late 2024 to evaluate its usability and deposit function.