The National Bank of Cambodia (NBC) has signed an agreement with a Japanese firm to develop a blockchain-based payment system that could potentially allow for the regulated usage of a cryptocurrency, which would eliminate the use of formal financial institutions to send and receive money.

According to an announcement on Friday from the Japanese financial technology firm Soramitsu Co, the company signed a partnership agreement with the NBC to study the possible implementation of a blockchain-based open-development software known as Hyperledger Iroha, a product backed by the Linux Foundation, a US-based company that distributs the ledger technology program.

A distributed ledger, also known as a blockchain, allows for the use of digital currencies such as bitcoin, but provides greater verification safeguards for transmitting digital assets and currencies. Based on open-source software, the technology claims to be more robust in preventing cyberattacks by creating a shared ledger that is recorded by all individuals or institutions that access the network.

The central bank could not be reached for comment yesterday about the scale of the agreement or its level of commitment towards its implementation. Nevertheless, the NBC’s commitment joins a growing rank of countries that include central banks from China, England, Australia, Singapore and Sweden that are actively investigating how the technology can be incorporated.

“Through our work with the National Bank of Cambodia, we will be able to take the first step towards creating a more efficient payment infrastructure, which we hope to expand globally in the future,” Kazumasa Miyazawa, CEO of Soramitsu, said in the announcement.

The technology would bypass the need for ATMs and formal financial institutions for customers by allowing them to send and receive funds directly, while central banks and physical financial institutions could use it for streamlined interbank lending activity, according to Martin Kendrik, the founder of the Cambodian Cryptocurrency, Bitcoin and Blockchain Community.

“While I am a bit surprised that Cambodia is potentially pursuing blockchains so quickly, it is good for the central bank to be progressive and not regressive and follow models like Japan and Singapore,” he said. “If Cambodia invests in this technology, it would put them in a strong position to insulate themselves from external currency shocks.”