cambodia - Pwim.Net

Crypto Leaders Discuss Libra, China's CBDC and a Cashless Future at the Singapore Fintech Festival

The Singapore Fintech Festival gathered even more blockchain professionals on Day 2 of the event, kicking off with representatives of tech giants including Intel, Microsoft, and Nasdaq sharing insights on navigating the impending economic slowdown and global uncertainty regarding the global access to data.

A noteworthy panel followed on the topic of “defining the future of digital currency,” joined by Christian Catalini, co-creator of Libra and Head Economist of Calibra, Mu Changchun, Director-General of the Digital Currency Institute of the People’s Bank of China, HE Serey Chea, from the National Bank of Cambodia and Umar Farooq, Head of Blockchain at J.P. Morgan Chase & Co.

Catalini explained that in the current economic tensions, although tech has been around for 30 years, 1.7 billion people are still unbanked. He mentioned that some of the average charges for sending a remittance are around 7%; by using blockchain technology, a lot of issues can be solved for real people.

Mu further explained China’s development of its central bank digital currency (CBDC) and claimed that one of its goals is for financial inclusion for the people who live in the remote and rural areas in China. He stated that China is “not aiming to keep information on the general public,” but rather to create a cash-light society while “preparing for anything bad happening” in the financial ecosystem.

Chea introduced the Bakong Project by Cambodia’s national bank, while highlighting that mobile phone penetration has been huge in Cambodia, with subscriptions over 20 million in the country – the biggest challenge they are currently working on is bringing the mobile payments and the traditional banks together. Having explored with Hyperledger, the central banks could issue a wallet to everyone to use and download, while the banks and payments services could get access to tokenized fiat, and then issue it to the end-users. Consumers can then withdraw digitized fiat to their own wallets.

The National Bank of Cambodia Looking to Launch New Centralized CBDC This Quarter

The National Bank of Cambodia digital currency, which is a central bank digital currency, called Bakong, was launched on a trial basis in Cambodia in July 2019.

Chea Serey, the director-general of the National Bank of Cambodia, said that the CBDC will be operational and launched this quarter. Described as “the national payment gateway for Cambodia,” Serey explained that Bakong would be playing a central role in bringing all players in the payment space in Cambodia to the same platform, allowing greater efficiency for end-users payment regardless of which bank they use.

Bakong uses a closed system, backed by banking authorities, with a software wallet linked to the user’s bank account to be able to transact. The system allows real-time transactions, and the central bank hopes to enable cross-border payments through the Bakong system. The central bank also noted that it stores centralized records regarding the transaction details.

The national payment system is cheaper and is more convenient when compared to conventional payment and transfer systems, including credit and debit cards. President Shin Chang Moo, of one of the supporting banking members, Phnom Penh Commercial Bank, said, “We are in the final stages of the deployment. It has taken a little longer than expected because we were ensuring that the system is as useful and convenient for the users as possible. We will offer the service as soon as it launches.”

Serey previously highlighted that mobile phone penetration has been tremendous in Cambodia, with subscriptions over 20 million in the country – the most significant challenge they are currently working on is bringing the mobile payments and the traditional banks together.

Image via Shutterstock

Cambodia Officially Launches Its State-Backed Digital Currency “Bakong”

The Central Bank of Cambodia officially launched a CBDC that runs on a blockchain network developed by Soramitsu Co, a Japanese financial technology startup. The National Bank of Cambodia said that the digital token (e-money) has now become fully operational following limited scope rollouts and extensive pilots.

The launch event took place at Phnom Penh, the capital of Cambodia. The central bank said that the digital token called “Bakong” would operate via smartphone apps and support transactions in the riel (the Cambodian fiat currency) and the US dollar. The Central Bank believes that the newly launched CBDC would reach the unbanked population that constitutes more than 75% of the adult population. Furthermore, the National Bank of Cambodia expects the e-money to assist Cambodians in transferring money and making payments between individuals using their smartphones.

As few citizens have traditional bank accounts, smartphones have penetrated every part of the Southeast Asian nation. Chea Serey, Assistant Governor at Cambodia’s Central Bank, said that she hopes that the e-money would assist in slowing down the spread of the Covid-19 outbreak in the nation. She said: “I hope the official launch of the Bakong system today will help to promote social welfare and also prevent the spread of that disease through facilitating e-payment from person to person seamlessly without involving cash.”

Pen Chenda, a senior executive at the Cambodian Association of Finance and Technology (CAFT), mentioned that the e-money would especially benefit small businesses because of the risks and costs related to physical cash handling. The e-money uses the Soramitsu Co-developed “unique consensus algorithm” and the Hyperledger Iroha blockchain network which can verify transactions across a distributed ledger to eliminate double payments and fraud risks.

July last year, the National Bank of Cambodia started its pilot trials. So far, an estimate of 20 financial institutions had participated in the project while others expected to join.

Central Bank Digital Currencies starting to become a reality

Great events have happened during this month in the CBDC space. In the recent few days, Bahamas becomes the first nation to launch its state-backed digital currency. China continues moving toward the launch of its anticipated digital yuan. The Bank of Canada also announced that they are examining the possibility of launching a national digital currency that would enable data collection of how citizens spend their money.

Moreover, the Reserve Bank of Australia said that although it has not found strong public policy case scenario in which a CDBD would bring to the nation, it has not given up on the quest to issue a Central Bank Digital Currency. Lastly, Spain’s Central Bank, “Banco de España,” published its strategic plan, indicating that the Central Bank would examine different design proposals and study the economic implications of a CBDC in the nation.

Bahamas Ranks First as The Country with Most Advanced Retail CBDC Development

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Bahamas and Cambodia are the two countries with most advanced central bank’s retail digital currency projects, according to a news report released by PwC (PricewaterhouseCoopers accounting firm).

Despite China being regarded as the most advanced nation in its CBDC development, it is ranked third in terms of the maturity of its retail CBDC projects.

The report shows that the Bahamas, with its Sand Dollar, is the nation with the most advanced retail CBDC. As of last year, all Bahamas residents can now access the currency’s digital wallet through a physical payment card or a mobile application.

Cambodia becomes the second in retail CBDC because its CBDC project is already live.

China ranks third because its project is still in the testing phase, the PWC report said. The country has not disclosed the estimated launch of the project and not all citizens can access the currency.

However, this is not to say that China’s digital yuan won’t be the most impactful CBDC once it is fully launched. The country’s economy is known as the second largest in the globe while Bahama is the 130th.

As per the PwC report, CBDCs are classified into two types: interbank and retail. A retail CBDC can be directly held by citizens and is utilized as a digital form of money as a complement to physical cash. On the other hand, an interbank CBDC is restricted for use by financial institutions for financial settlement process and interbank payments.

The report stated that more than 60% of central banks are conducting research on digital currencies, with retail projects more active in emerging economies given the significance of financial inclusion, while interbank or wholesale application appears to be more dominant in advanced economies.

The PwC report identified that only 23% of retail projects have reached the implementation stage, while almost 70% of wholesale projects are conducting pilot programs.

With regards to interbank or wholesale projects, China and Thailand tied for the top ranking, followed by Singapore, Canada, and the UK.

Central Banks Response to Crypto Revolution

Central banks’ efforts to launch digital currencies accelerated for the first time when the popularity of Bitcoin significantly increased and the Facebook-backed Libra project (currently known as Diem) was announced.

Other nations are becoming worried about China’s progress with its digital currencies, including the US. Last year, the Bank of Japan stated that one of its major reasons for expediting research into its national digital currency was the perceived threat of China’s digital yuan.

While China is in the trial phase for its digital yuan, other nations have accelerated their efforts. Economies such as the European Union and Sweden are actively exploring their CBDC projects. However, the US Federal Reserve has indicated that it is not in a rush to launch a digital dollar.

Recently, a senior official from China’s central bank said that China’s goal is in establishing a digital yuan is to internationalize its currency and promote its domestic use, but not to replace the US dollar.

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Cambodia Bars Using and Trading of Crypto

In Asia, the Cambodian Ministry of Finance and Economics announced on Wednesday that no-issuance and circulation of cryptocurrencies would be allowed in the country.

The agency, which is responsible for the administration of financial and economic policy and affairs in the Kingdom of Cambodia, released a document, stating that despite the rapid growth of fintech and its significant impact on the global economy in recent years, the Cambodian government has not changed its policy of banning the use of crypto coins.

According to the document, the National Bank of Cambodia, the Cambodian Ministry of Finance and Economics, the Securities Commission, and the National Police have jointly issued a statement that prohibits any issuance, circulation, and trading of cryptocurrencies in the country. So far, the Cambodian government has not awarded a business license to any crypto firm in the nation, meaning that it is illegal to issue, circulate, and trade crypto assets in Cambodia.

The Cambodian Ministry of Finance and Economics further stated that currently Cambodia’s draft FinTech Development Policy is in force to ensure that the nation can benefit from the rapid development of financial technology and minimize risks.

The agency also mentioned that the Cambodian government has introduced some new policies and measures in order to promote the revitalization and recovery of the economy after the pandemic of COVID-19. The government believes fintech is one of the key policies that would enable such recovery.

Gearing Up for CBDC

The latest move indicates that Cambodian authorities are taking more steps to crack down on cryptocurrencies.

In October 2020, the Central Bank of Cambodia adopted blockchain technology to offer digital versions of its own digital currency to steer citizens away from trading in what many perceive to be a bubble associated with cryptocurrencies.

During that time, The National Bank of Cambodia launched its digital currency, Bakong – a blockchain-based digital payment system – as part of effort to wean people off US dollar transactions with a digital alternative and to encourage cashless transactions.

Since trading cryptocurrency is illegal in Cambodia, trading levels have been quite low. However, many local investors are actively trading cryptos through foreign platforms.