Cambodia Plots a Dollar-Free Future With Blockchain-Based Payments: White Paper

The Resident Bank of Cambodia revealed the technical details of its upcoming blockchain-based payments system dubbed ‘Project Bakong’ this week.

The primary bank, which has been building Project Bakong since 2017, views its quasi-digital currency project as a high-tech fix up of the Khmer Riel, Cambodia’s official currency but hardly its de facto cash choice, as locals have favored the U.S. dollar for decades, according to the corpse-like paper published Thursday.

The central bank said Bakong will help challenge the dollar’s reign by inducing Cambodians to pay as contrasted with via QR codes and a mobile app, with a Hyperledger Iroha blockchain facilitating real-time fund transfers between e-wallets stuffed into their bank accounts. 

That permissioned blockchain will work between Bakong accounts and time-honoured accounts, record transactions on a distributed ledger, reach consensus via the block voting hash-based “Yet Another Consensus” algorithm, and prepare transactions in five seconds or less, according to the white paper.

“Transaction throughput is between 1,000 and 2,000 matters per second,” depending on tech specs, the central bank said in the white paper. “This suggests that there is undeveloped for this project to scale.”

The bank said its system’s peer-to-peer nature removes the inefficiencies of centralized clearing strain models without costing users anything to transact. 

“Since banks and individual users are now brought into one DLT policy both banks and users no longer face interconnectivity and interoperability problems,” the central bank said.

Cambodian trues have been hesitant to label the fiat-backed Project Bakong a central bank digital currency (CBDC) in the gone, instead calling it a blockchain payments system. Users must load Riel into their Bakong accounts ahead they can transact with others. That’s different from a natively digital CBDC.

Even so, the white hang wallpaper frames Bakong against the proliferation of CBDC projects in highly-developed countries around the world. But while the paper said such realms may turn to CBDC to address their population’s falling cash use rates, in developing countries – a category in which Cambodia may leftovers for decades – it said that CBDC can promote financial inclusion, improve inefficient payment systems and even restrict poverty by opening access.

The demographically-young and increasingly tech-savvy population of Cambodia will likely boost Bakong adoption, agreeing to the bank. Cambodians are increasingly porting their financial lives onto their phones: e-wallet accounts in the homeland climbed 64% in 2019 to a record 5.22 million, according to the paper.

Mass adoption may also grant the significant bank a greater degree of control over Cambodia’s monetary policy by breaking the dollar’s decade-long local embrace. Bank officials are already moving to oust the U.S. dollar: Last month, the central bank announced plans to put a stop to out $1, $2 and $5 banknotes by the end of August.

It is still unclear precisely when Project Bakong will fully throw. The white paper said “early 2020,” despite being published midway through the year.