The National Bank of Cambodia has revealed the technical details of its upcoming blockchain-based payments system named ‘Project Bakong’ this week.
It has been reported that according to the white paper published on June 18, the central bank has viewed its quasi-digital currency project as a high-tech revamp of the Khmer Riel, Cambodia’s official currency, as locals have favored the US dollar for decades.
However, the central bank said that Bakong will help challenge the dollar’s reign by inducing Cambodians to pay instead through QR codes and a mobile app, with a Hyperledger Iroha blockchain facilitating real-time fund transfers between e-wallets plugged into their bank accounts.
Cambodia Plots #DollarFree Future With #Blockchain-Based #Payments: #WhitePaper https://t.co/hRhxlkIPZd #fintech #Cambodia #CBDC @realDannyNelson @CoinDesk pic.twitter.com/0kkIOygqX9 — Spiros Margaris (@SpirosMargaris) June 21, 2020
According to the white paper, that permissioned blockchain will work between Bakong accounts and traditional accounts, record transactions on a distributed ledger, reach consensus via the block voting hash-based “Yet Another Consensus” algorithm, and process transactions in five seconds or less.
The central bank said in the white paper:
“Transaction throughput is between 1,000 and 2,000 transactions per second. This suggests that there is potential for this project to scale.”
Likewise, the bank said that its system’s peer-to-peer nature removes the inefficiencies of centralized clearinghouse models without costing users anything to transact.
Also, the central bank said:
“Since banks and individual users are now brought into one DLT platform both banks and users no longer face interconnectivity and interoperability problems.”
As per the report, Cambodian officials have been hesitant to label the fiat-backed Project Bakong a central bank digital currency (CBDC) in the past, instead of calling it a blockchain payment system. Users must load Riel into their Bakong accounts before they can transact with others. That’s different from a natively digital CBDC.
Even if the white paper frames Bakong against the proliferation of CBDC projects in highly-developed countries around the world, the paper said that such nations may turn to CBDC to address their population’s falling cash use rates, in developing countries, a category in which Cambodia may remain for decades.
It said that CBDC can promote financial inclusion, improve inefficient payment systems, and even reduce poverty by opening access.
According to the bank, the demographically-young and increasingly tech-savvy population of Cambodia will likely boost Bakong adoption.
The paper stated that Cambodians are increasingly porting their financial lives onto their phones, e-wallet accounts in the country climbed 64% in 2019 to a record 5.22 million.
It has also been reported that mass adoption may also grant the central bank a greater degree of control over Cambodia’s monetary policy by breaking the dollar’s decade-long local hold.
Bank officials are already moving to remove the US dollar, as last month, the central bank announced plans to phase out $1, $2, and $5 banknotes by the end of August.
Thus, it is still unclear when the project will be fully launched, as the white paper said “early 2020,” despite being published midway through the year.