FINANCIAL INSIGHT: BAKONG
Bakong could pave the way for digital currency in Cambodia
Similar to its namesake, it is now the backbone of the country’s digital payments.
H.E. Serey Chea, National Bank of Cambodia
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n October 2020, the National Bank of Cambodia (NBC) unveiled Bakong, its national mobile payment and banking platform aimed at strengthening the use of the Khmer riel and curbing dollar dependency. But beyond this goal, Bakong—named after one of the ancient Khmer state temples—makes use of distributed ledger technology (DLT) and blockchain technology, prompting questions over whether the platform could serve as a stepping stone for Cambodia to join the digital currency race in the region. As of now, however, there are no plans for it. “From the NBC perspective we don’t see a good use case of a full-fledged [central bank digital currencies] yet,” H.E. Serey Chea, the official spokesperson of the NBC, told Asian Banking & Finance in an exclusive correspondence. “It doesn’t matter if Bakong is CBDC or not, as long as it can perform the main functions it intended.” Bakong can be configured in such a way that it becomes a full
22 ASIAN BANKING & FINANCE | Q2 2022
It doesn’t matter whether Bakong is CBDC, as long as it can perform the main functions as intended
CBDC, according to NBC, but right now their focus is to promote and implement financial inclusion. “The introduction of Bakong is to address the issue of connectivity and interoperability, attain efficiency in payment system, promote financial inclusion and ease of KHR cash payment. Bakong [will] serve as a backbone payment system,” NBC’s Chea explained. The adoption of Bakong has been steady: over 8.3 million transactions have been logged since it launched in late 2020. The platform also now has over 7,500 merchants and 58 banking and financial institutions that are participating. One of the goals mentioned in launching the Bakong system or platform is to curb dollar dependency and boost the use of the riel. How has Bakong helped in moving away from dollar dependency? Cambodia is still considered a highly dollarised economy whilst most of the transactions are still cash-based. This could hinder
the effective implementation of monetary policy, as well as payment system development. Thus, the NBC, as the monetary and payment system authority, has developed the Bakong aiming at promoting and implementing the use of local currency and electronic, cashless payment in Cambodia. The Bakong is developed with a feature that allows for realtime fund transfer and instant payment transaction, and given its interconnectedness and interoperability amongst different payment service providers and the adoption of QR code payment, it provides greater convenience and is a more widely-accepted channel for mobile banking or wallet users to make electronic payment at any merchant regardless of their acquiring bank. In addition, with the possibility to link with bank accounts, customers are able to make fund transfers from Bakong accounts to their bank accounts and vice versa. With our younger demography, the introduction of a modern payment system via QR code has been adopted without much hesitation, therefore, encouraging more instances of electronic payment in place of cash. In addition, the development of Bakong is expected to encourage the use of local currency in the sense that it facilitates the payment of highvalue transactions in KHR more conveniently. Bakong could also be utilised as a tool in promoting and implementing the use of local currency in such a way that NBC can introduce rules incentivising the use of KHR within Bakong. Since the introduction of Bakong, the transaction in local currency via Bakong has been increasing from month to month. Tell us more about the journey of Bakong’s development and launch. In 2016, NBC established a
