National Bank of Cambodia (NBC) assistant governor Chea Serey on Monday reiterated her statement that the recently-launched Bakong, an interbank blockchain-based payment system, is not a central bank digital currency (CBDC) and is wholly fiat-backed.
She made the comment during the panel discussion on “Money in the 21st century: what role for Central Bank Digital Currencies and global coins”, which was hosted via video link by the Paris-based Organisation for Economic Cooperation and Development (OECD).
Bakong comes amid the Kingdom’s push for fintech development as a toolbox to engage the unbanked population and transition to a digital economy, she stressed.
But the transition is not seamless, she warned – high levels of digital and financial literacy, as well as access to universal and sustainable electricity, internet and mobile connectivity are notable prerequisites.
“These are long-term challenges that will require infrastructure investment. Though possible, we – especially the government – must work hard on meeting the basic needs of the people.
“I know that [Facebook’s upcoming cryptocurrency] Libra was designed with cross-border transactions in mind and that’s swell.
“At present, inbound transactions have to be exchanged into the local currency, or potentially into greenbacks, and then completed in the country. In essence, it will be of great help to the people and that’s all good and well.
“The main challenge when it comes to digital currencies is determining how to use them and identifying what we want out of them. They will back modernisation efforts and breed higher aspirations.
“At the end of the day, it all hinges on the design and what we’ve designed is a hybrid between a CBDC and a backbone payment system, which we needed more than anything else.
“That is that, and as I see it, we shouldn’t get too carried away with what to label it or the technologies it features,” Serey said.
Facebook is reportedly poised to launch Libra, which was unveiled in June last year, later this year.
But the prospect of the social media giant’s 2.5 billion users adopting the cryptocurrency has drawn a constant stream of intense scrutiny from global regulators, with many concerned that it could hive off national control over money, Reuters reported in April.
Libra was initially planned to be backed by a wide basket of currencies and government debt, Reuters said. But regulators and central banks pointed out that it could destabilise monetary policy, facilitate money laundering and compromise users’ privacy, with some threatening to ban it.
On October 28, the NBC officially launched Bakong, which, according to Serey, would enable interoperability between banks and financial institutions that is safe, efficient and cost-effective, give a powerful impetus to rural financial sector development and nurture financial inclusivity.
Speaking at the launch, Serey said the number of participants in the system stands at 18, 16 of which are banking or financial institutions and two are payment service providers.
At the same time, she added, 24 additional institutions have been granted membership in principle and are preparing to review the technicalities involved in connecting to the system.