Cambodia: Blockchain-Based Payments System ‘Project Bakong’ to Challenge US Dollar Hegemony

According to a Coindesk report published on June 19, 2020, the National Bank of Cambodia is poised to go ahead with its blockchain-based payments system dubbed ‘Project Bakong’ to disrupt the dollar’s hegemony in the country.

Project Bakong to Disrupt Dollar Hegemony

Despite it being in the works since 2017, Cambodia’s distributed ledger technology-based (DLT) payments system, Bakong, until now, has failed to displace the use of the U.S. dollar in the country.

Per a recent white paper published by Cambodia’s central bank – Bakong – the quasi-digital currency project which is a high-tech revamp of Cambodia’s official currency, Khmer Riel has so far been unable to penetrate through the multi-decade long U.S. dollar hegemony in the country.

However, now the central bank seems to be amping up its efforts to cement Bakong as an indistinguishable part of every Cambodian’s life. Specifically, Bakong will help disrupt the US dollar’s virtual monopoly in the payment’s space by inducing Cambodians to pay instead through QR codes and a mobile app. The payments via Bakong will be enabled via the Hyperledger Iroha blockchain that will enable real-time fund transfers between the bank accounts-linked e-wallets.

According to the report, the permissioned blockchain will bridge the gap between Bakong accounts and traditional bank accounts. Through Bakong, users will be able to record transactions on a distributed ledger and reach consensus via the system’s “Yet Another Consensus” algorithm. The transactions will be processed in five seconds or less, the white paper notes.

The white paper puts Bakong’s transaction throughput between 1,000 and 2,000 TPS, depending on tech specs. The dependency on tech specs hints that the project has the potential to scale an even larger number of transactions.

The central bank added that Bakong’s P2P nature eliminates the inefficiencies associated with centralized clearinghouse models without having users to incur any additional costs. The 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.”

CBDC Race Heats Up in Southeast Asia

While not explicitly labeling Bakong a central bank digital currency (CBDC) project, the initiative’s white paper does pit Bakong against the various CBDC projects being undertaken in the more developed countries across the world.

The white paper notes that a CBDC can promote financial inclusion, improve inefficient payment systems, and reduce poverty by enabling greater financial inclusion.

In similar news, BTCManager reported on June 19 that Thailand’s central bank had partnered with one of the country’s largest conglomerates to run a pilot test for a CBDC.