Cambodia targets hybrid digital currency on blockchain to unbanked

  • A blockchain-based payment system for the benefit of a large unbanked population
  • Small countries have more to gain from digital currencies
  • Low levels of digital, financial literacy is a challenge

BANGKOK, Dec. 22 (Thomson Reuters Foundation) – When the central bank of Cambodia launched a digital payment system pilot project in July 2019, its goal was to increase financial inclusion in the country and expand the use of local currency against the US dollar. Then came the coronavirus pandemic.

For the National Bank of Cambodia (NBC), which has been researching a blockchain-based payment system since 2016, the pandemic has been a godsend that has accelerated the adoption of Bakong, named after an ancient Khmer temple near Siem Reap. .

Officially launched in October 2020, Bakong – which provides a platform for more than a dozen banks and financial institutions – has reached around 5.9 million users, with transactions worth nearly 2 million billion dollars to date, according to NBC.

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“We didn’t anticipate a pandemic when we launched in 2020,” said Chea Serey, chief executive of NBC.

“But it was a blessing in disguise, because the adoption was faster because people were worried about the management of the money,” she said.

Around the world, the pandemic has accelerated the growth of digital transactions, with businesses encouraging online payments and governments taking action to increase the financial inclusion of those who had been excluded due to poor connectivity, limited access to handsets or a low level of literacy.

Bakong, developed by Japanese blockchain company Soramitsu, allows Cambodians to use a free mobile app to make payments and transfer money through any bank on the platform, even if they don’t have no traditional bank account.

More than 200,000 previously unbanked Cambodians now use a Bakong e-wallet, NBC said.

This is just a fraction of the more than 70% of the estimated 17 million unbanked people in the Southeast Asian country who never or rarely use a bank.

“Since a large part of the population is unbanked, creating a system that people without banking experience might find intuitive took a lot of work,” Makoto Takemiya, Managing Director of Soramitsu Holdings Group, told Tokyo.

But cellphone penetration is high and the population is “mostly young and comfortable with cellphones,” so adoption has been fairly rapid, he told the Thomson Reuters Foundation.


Globally, the use of physical money is declining and authorities are seeking to fend off the growing threat from cryptocurrencies which they believe are highly volatile and can increase systemic risk, promote crime and harm investors. .

A survey earlier this year of 65 central banks by the Bank for International Settlements showed that 86% are exploring or testing digital currencies, with central banks in emerging and developing economies more likely to issue digital currencies from banks. power plants (CBDC).

The Bahamas became the first country to launch a CBDC, the Sand Dollar, in October 2020, while Nigeria was the first African country to launch a digital currency – the eNaira, in October of this year. Bakong is described as a hybrid CBDC.

Most of the financial technology innovations of recent years have taken place in emerging markets, as developed markets have been well served by credit and debit cards, said Emir Hrnjic, head of FinTech training at the Asian Institute. of Digital Finance.

“Small nations are adopting digital currencies faster because they have real challenges to overcome, and the risk of adopting new technology is likely less than the risk of doing nothing,” added NBC’s Chea.

Bakong is also intended to help small businesses and lower the costs of sending remittances for over one million Cambodian migrant workers abroad who otherwise pay high fees to money transfer services and informal agents. .

In 2019, Cambodian migrant workers abroad sent remittances worth around $ 1.5 billion, or nearly 6% of the country’s gross domestic product.

Cambodian migrant workers in Malaysia can now send money to their unbanked families through Bakong, and NBC is looking to add more countries to the platform.

“Rural families depend a lot on the money sent to them by workers in cities or abroad. So that’s essential, ”said Hong Reaksmey, director of the global charity ActionAid in Cambodia.

“It’s also helpful for the government to send cash transfers, and for the aid and development sector to help families during times such as COVID-19 – which is otherwise quite difficult with the large number of unbanked people, ”he said.

But low levels of digital and financial literacy are a challenge, he added, noting the increase in cyber scams in Cambodia.


With Bakong, users can make payments and transfers in US dollars or Cambodian riel – the two currencies used in the country – with just a phone number or QR code.

The blockchain records all transactions in a time series of cryptographically secure records.

While the blockchain-based system supports faster, more transparent settlements and lower costs, it also gives central banks the “power to observe and control the finances of individuals who might violate customer privacy. “said Hrnjic.

The Bakong system does not use any personally identifiable information and preserves user privacy while allowing the central bank to view transactions, Takemiya said.

The inherent security features of the blockchain also mean less risk of fraud, forgery and cyber attacks, he said, adding that they were looking for a CBDC model for Laos, which also has a large unbanked population and high mobile penetration.

Yet the fundamental challenges of low levels of digital and financial literacy, as well as unequal access to the internet and mobile connectivity remain.

Thea Chounly, a textile worker in the Cambodian capital Phnom Penh, has long used Wing – a money transfer service that requires the sender and recipient to visit a point of sale – to send money to his family in the province.

“Bakong is a new system, so no one is using it,” he said. “Everyone uses Wing or TrueMoney so it’s easier for me and my family to keep using it.”

NBC recognizes the challenges, Chea said.

“Technology is a means to an end, not the end goal,” she said. “We hope to increase adoption by improving the financial and digital literacy of migrant workers and their families.”

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Report by Rina Chandran @rinachandran; Editing by Zoé Tabary. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, which covers the lives of people around the world who struggle to live freely or fairly. Visit

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