Cambodia’s central bank ‘National Bank of Cambodia’ will launch a distributed ledger technology (DLT) network to enable greater networking in the country’s payments sector, which will go LIVE by the end of the year.
It has been reported that consumers will be able to make near-instant payments through the platform by using a mobile app and QR codes.
However, during Consensus: Distributed on May 11, Serey Chea, the Assistant Governor and Director-General of the National Bank of Cambodia, revealed that the primary goal of the DLT network was to undermine the popularity of the US dollar.
Chea said:
“Cambodia is probably the most dollarized economy in the world. The whole financial system or actually our whole economy, [over] 90 percent […] is based on US dollars.”
She said that its DLT-based payment network had been in development for four to five years and would soon launch.
Chea added:
“We plan to go live in 2020, hopefully very soon.”
As per the report, there are 12 participating banks trialing the platform and it’s expected that all of the country’s financial institutions will join the platform voluntarily.
Cambodia hopes to undermine domestic penetration of the US dollar through its DLT payments platform https://t.co/3E8huuLMl6 — Cointelegraph (@Cointelegraph) May 13, 2020
Likewise, Cambodia’s DLT payments platform is designed to make it easier for Cambodia’s banks, E-wallet providers, and banking customers to transact with each other.
Chea also announced that Cambodia has begun developing a “cross-border payment project” in partnership with Maybank, the leading Malaysian financial institution, by targeting remittances from migrant workers.
She said that there was no good reason for the country’s ongoing embrace of USD.
Also, she stated that “the use of local currency is very minimal and the reason is more psychological than economic” by arguing that most countries facing “dollarization” exhibit weak macroeconomic factors.
But, she also added:
“In the case of Cambodia, all our fundamentals are strong. We have a very stable exchange rate, very low inflation rate, and a very good economic outlook.”
It has been analyzed that surveys conducted by the central bank suggest the impracticality of making day-to-day transactions using Cambodian riel is the primary reason for its lack of domestic use.
The survey stated:
“One U.S. dollar is equal to 4,000 riels. If you were to spend on something that is worth an equivalent of 10 U.S. dollars then you have to pay 40,000 riels, and then as the value increases there are more zeros. […] From our survey, that makes life more complicated for many users.”
Thus, Chea concluded:
“We thought that if we were to make the payment in the electronic form, then people don’t have to be too bothered so much about the number of zeros and the inconvenience of carrying a lot of banknotes in their pocket.”
Source: Cointelegraph | Image: IDEMIA