According to Cambodia’s central bank, the country’s blockchain-based payment infrastructure, dubbed “Bakong” by Cambodian central bankers, went online earlier this year. The launch provides residents with a state-authorized platform for performing immediate mobile payments using QR codes and cellphone numbers that connect digital wallets via a blockchain.
Bakong, built by Japanese technology company Soramitsu, is hosted in the National Bank of Cambodia via the Hyperledger Iroha blockchain.
Bakong is completely fiat-backed, ensuring that users may make payments using their dollar or riel reserves. Unlike other central banks’ digital currency (CBDC) programs, it does not use digitally native money. It is a crucial step towards modernising and de-dollarising the country’s payment system.
Serey Chea, Director General of the National Bank of Cambodia, asserted boldly that Bakong’s e-payments would aid in the prevention of the spread of COVID-19 throughout the nation.
The National Bank of Cambodia’s Bakong blockchain payment system eventually went into production after a lengthy test period. It is referred to as a retail central bank digital currency (CBDC) by the central bank. It also represents tokenised commercial bank deposits in Cambodian riels or US dollars.
Cambodia has a high percentage of smartphone users; more than 100% of the population has a cellphone, indicating that some own multiple. However, just 22% of adults over the age of 15 have a bank account, and a bank account is not required to use Bakong. Instead, a wallet may be created by receiving money from another person or visiting a payment agent and exchanging cash for tokenised money.
Director-General Chea went on to say that NBC’s goals are to increase financial inclusion, security, efficiency, and the promotion of local currencies. Bakong will play a key role in bringing all users together on the same platform, making it easy for everyone to transfer money to one another. They also want to de-dollarise the economy, which is still largely reliant on the usage of the US dollar daily.
Soramitsu, the primary business behind the Hyperledger Iroha protocol, created a solution to the distributed ledger technology (DLT) on which Bakong is built, allowing each wallet to be tied to a financial institution. There are now 18 financial institutions on the list. While the central bank is in charge of the master ledger, commercial banks have nodes with duplicate copies of the essential data to ensure redundancy.
The conventional database interbank payment system in Cambodia has been replaced with Distributed Ledger Technology (DLT).
How to Register
A user must submit two items:
- a picture ID
The ID is OCR-processed, and the selfie is matched to the ID’s photo.
The smartphone app is purposefully basic, with only four functions:
- A wallet owner can transmit money to a registered user.
- They can also transmit money by scanning the alleged receiver’s QR code.
- They may also receive money by displaying their QR code.
- There is also the option of transferring funds to a bank account.
Those who do not have a smartphone can transfer money using the recipient’s cellphone number. It will be challenging to establish the user’s identification if they do not have a smartphone. As a result, only little value exchanges are possible. There are no costs for transfers, and everything is finished in about 2-3 seconds.
Shin Chang Mun, President of Phnom Penh Commercial Bank, stated that Bakong would establish an economically complete ecosystem that will benefit all players in the sector.
The National Bank of Cambodia’s moonshot is Project Bakong. It has already piqued the interest of the crypto sector, which is intrigued by the prospect of central banks experimenting with virtual currencies. The blockchain-based backbone payments system has the potential to alter millions of people’s lives and serve as a model for how such a contemporary foundation may enhance life in the developing world and beyond.