Cambodian Central Bank Encourages Use Of Riel Through The Bakong Digital Currency System

The Central Bank of Cambodia encourages the use of Riel through the Bakong digital currency system (Photo; Doc. Phnompenhpost)

JAKARTA - The Central Bank of Cambodia is taking steps to encourage the use of local currency, riel, by utilizing a digital financial system called Bakong. Its main goal is to reduce dependence on foreign currencies, especially the United States dollar, and promote the use of riel in the country's economy.

Bakong: Facilitating Cross-Border Transactions In Riel

According to the governor of the Central Bank of Cambodia, Chea Serey, quoted from CoinSpeller, in an interview with Nikkei Asia, cross-border payments using a QR code made through Bakong are expected to increase the use of local currencies. This will improve the value of riel and reduce the dominance of the US dollar in Cambodia's economy, given that more than 80% of transactions are carried out in USD.

One of the main strategies to increase the use of riel is to push cross-border transactions within the currency. The Bakong system allows QR code-based payments between Cambodia and neighboring countries such as Thailand, Laos, and Vietnam, as well as transactions involving UnionPay from China. By promoting cross-border transactions within riel, Cambodia's central bank aims to encourage traders to do business in local currency. Thus, the circulation and adoption of riel within Cambodia and on its borders will increase.

Serey added that this effort aims to encourage the use of riel, but he will not require the use of local currencies through his administrative powers. Cambodia's central bank plans to expand this cross-border function to India in early June and is in talks with the Japanese government.

Reducing Dollar Domination And Reaching Economic Independence

The main goal of promoting riel is to achieve greater economic independence and control the country's monetary policy. Therefore, Bakong is considered one of the tools, but not the only solution. The government has also received tax payments and paid salaries of domestic employees, which further supports the goal of promoting the use of local currencies.

Since its launch in 2020, the Bakong system has continued to develop to facilitate payments for both individuals and businesses. Unlike other central bank digital currencies (CBDC) representing one currency, Bakong is supported byriel Cambodia (KHR) and the US dollar (USD). The total payment value that has been made through this virtual transaction system reaches 70 billion US Dollars, almost double the value of the Cambodian GDP. Transactions inriel in 2023 alone reached 20 billion US Dollars out of this total value, more than double the figure in 2022.

Although Bakong is experiencing stable growth, Serey admits that there are still several challenges that must be overcome, including managing capital flows and ensuring the right customer recognition process (KYC) for users. The governor also commented on digital currencies in general, stating that digital currency internationalization, such as e-CNY from China, still has a long way to go.