The central bank of Cambodia is actively promoting the use of its local currency, the riel, by leveraging a digital financial system known as Bakong. This initiative aims to decrease reliance on foreign currencies, particularly the US dollar, and enhance the adoption of the riel within the national economy.

Bakong: Boosting Cross-Border Transactions in Riel

In an interview with Nikkei Asia, the governor of the Cambodian Central Bank, Chea Serey, highlighted that cross-border QR code payments through Bakong are expected to increase the usage of the riel. This move is intended to strengthen the currency's value and lessen the dominance of the US dollar, which is used in over 80% of transactions.

A core strategy to enhance the use of the riel involves facilitating cross-border transactions using Bakong. This digital system supports QR code payments between Cambodia and neighboring countries like Thailand, Laos, and Vietnam, as well as transactions with China’s UnionPay. By encouraging these transactions in riel, the central bank hopes to persuade merchants to conduct business in the local currency, thus increasing its circulation and adoption.

Serey emphasized that while the goal is to promote the riel, it would not be enforced by administrative power. The central bank plans to extend this cross-border functionality to India by June and is also in discussions with the Japanese government.

Reducing Dollar Dominance and Enhancing Economic Independence

Promoting the riel is part of Cambodia's broader strategy to achieve greater economic independence and control over its monetary policy. Bakong is a key tool in this effort, but the government is also accepting tax payments and paying civil servant wages in riel to further encourage its use.

Since its launch in 2020, Bakong has been continuously developed to streamline payments for both individuals and businesses. Unlike other central bank digital currencies (CBDCs) that represent a single currency, Bakong is backed by both the Cambodian riel (KHR) and the US dollar (USD). The total value of payments made through Bakong has reached $70 billion, nearly double Cambodia’s GDP. In 2023 alone, riel transactions accounted for $20 billion, more than double the 2022 figures.

Despite Bakong's steady growth, Serey acknowledged challenges such as managing capital flow and ensuring proper know-your-client procedures. She also commented on the broader landscape of digital currencies, noting that the internationalization of digital currencies, like China’s e-CNY, still has a long way to go.