At the recent Singapore Fintech Festival, the city-state’s announcement that it would pursue a wholesale central bank digital currency (CBDC) pilot next year was big news, and justifiably so. As Southeast Asia’s key financial center, Singapore’s monetary policy decisions usually have regional implications.
What the pilot will aim to assess is whether a digital fiat currency could help Singapore boost efficiency and speed in payments while lowering costs. While these are important considerations, the reality is that Singapore, like many developed economies, does not need a CBDC. It is an affluent country in which almost every adult has a bank account. Its digital financial ecosystem is advanced. For Singapore a CBDC is a “nice to have.”
The same cannot be said for several of its neighbors: Cambodia, Laos and Myanmar. These developing nations could all potentially derive significant benefits from a digital fiat currency and indeed, Cambodia already is.
Project Bakong
Cambodia quietly made history three years ago with the launch of its retail CBDC Project Bakong, that was developed by the Japanese blockchain firm Soramitsu. In retrospect, Bakong’s launch was a bold move that has established Cambodia as a CBDC pioneer along with China and the Bahamas. In its three years of operation, Bakong has attracted 70 financial institutions as members, 49 of which are active. From January to June 2023, the Bakong payment system recorded over 35.4 million transactions, amounting to more than $12 billion.
Soramitsu should be credited for developing the blockchain infrastructure to power Bakong, but just as important to the Cambodian digital fiat currency’s success are the kingdom’s pressing financial inclusion needs – an estimated 70% of the population of 17 million is unbanked – and an underdeveloped digital payments ecosystem – in contrast to say, China or India, where existing payment rails are so effective that it is unclear how a CBDC can…
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