Kingdom pilots digital currency
Kingdom pilots digital currency
The National Bank of Cambodia (NBC) was among the first central banks to pilot a quasi-form of national payments system called the Central Bank Digital Currency (CBDC), the World Economic Forum (WEF) said at its 50th annual meeting in Davos, Switzerland.The NBC, the WEF and more than 40 central banks, financial institutions, researchers and global organisations are working together to create the CBDC Policy-Maker Toolkit for countries to analyse the suitability of digital currencies and guide them through the designing and deployment processes, the WEF said.
The past six months have been a wake-up call for central bank policy-makers, it said, as CBDCs have risen to prominence as a potential solution to multiple challenges such as financial inclusion and payment system efficiency.
However, due in part to the market-moving nature of central bank announcements, the majority of research and experimentation is done independently, behind closed doors.
WEF Blockchain and Distributed Ledger Technology head Sheila Warren said it is imperative that central banks proceed cautiously and rigorously analyse the opportunities and challenges posed.
“Given the critical roles central banks play in the global economy, any central bank digital currency implementation, including potentially with blockchain technology, will have a profound impact domestically and internationally,” said Warren.
WEF project lead Ashley Lannquist said: “We worked with almost a dozen central banks as well as prominent economists and financial industry leaders to create a common approach for evaluating and designing CBDC around the world.
“The toolkit is the first of its kind to provide a concise summary of the key issues for policy-makers considering a general-purpose or wholesale CBDC.”
The NBC has engineered the first full-scale deployment of a quasi-form of CBDC as part of “Project Bakong”, which started as a pilot test with a live and confined environment on July 18 and plans to go live early this year, said the WEF.
“A specific problem was identified. It needed to connect a fragmented payments economy – dominated by heavy cash usage and [payment service providers] – with commercial banks, merchants, and the country’s largely under-banked population to reduce payments frictions and increase financial inclusion.
“Developing a blockchain-based payment system was one solution to this challenge,” it said.
The CBDC Policy Maker Toolkit provides high-level guidance and information for retail, wholesale, cross border and private-sector issued “hybrid CBDC” as well as for large, small, emerging and developed countries, said the WEF.
It guides users through the CBDC evaluation process, with descriptions for each stage of the process. Worksheets and information guides with research references accompany and correspond to each section.
These documents serve as checks and references to the decision-making process and evaluate the role of distributed ledger technology within CBDC implementation.
They highlight important governance, user-data privacy, and financial inclusion and security issues.
NBC director-general Chea Serey could not be reached for comments over “Project Bakong”.
