The paper below was published in March 2024, and I had parked it while I pondered what to do with it. Now that this summer’s “doldrums” have settled in, I thought it would provide a good opportunity to update my thinking about the National Bank of Cambodia’s Project Bakong, launched in 2019, which was touted by the World Economic Forum as a “quasi-form of central bank digital currency (CBDC)”. I’ve never included it in my tabulations of central bank CBDC explorers because of that “quasi-form” qualifier, but the paper below takes a deeper dive into the Bakong plumbing that does lend some credence to Bakong being a CBDC although there are still unanswered questions. So here we go…
Design of a CBDC in a Highly Dollarized Emerging Market Economy: The Case of Cambodia (AEPR)
The Asian Economic Policy Review (AEPR) published a paper on the Project Bakong retail payment platform, launched by the National Bank of Cambodia (NBC) in October 2020. It is built on Hyperledger Iroha distributed ledger technology (DLT), and accessible through a mobile app that allows users to send, receive, deposit, and make QR code payments in Cambodian Riel (KHR) and USD. It is not a traditional interbank payment system in that all Bakong account balances are fully backed by reserves held in NBC wholesale settlement accounts, rather than being fractionally backed like regular deposits and deposit tokens. The NBC records individual end-user Bakong balances which are considered “cash equivalents” according to the Bakong 2020 white paper. The paper takes that to mean that the NBC explicitly guarantees the end-user balances, which the authors say they confirmed with NBC staff, which it argues makes Bakong a retail central bank digital currency (CBDC) platform according to the BIS (2020) CBDC definition (i.e., “a direct central bank liability”). [Read more at the AEPR]
It would be handy if the NBC published its financial statements, where we might expect some clarity on how Bakong is accounted for, but they don’t apparently!? This clarification seems important, because the NBC itself adamantly denies that Bakong is a CBDC platform! Mind you, it is odd that then NBC Assistant Governor Chea Serey, said that “we don’t gain any seigniorage from issuing it” yet surely the NBC earns seigniorage on the Bakong reserves held in NBC wholesale settlement accounts? Also, it’s notable that Soramitsu, NBC’s technology partner on the project, describes Bakong as a “next-generation real-time gross payments system” and not a CBDC platform?
If indeed the NBC explicitly guarantees user Bakong accounts, then at least conceptually Bakong is a retail CBDC, but I would really like to see how they account for it in their audited financial statements, which they don’t seem to share with the public. Also, it’s notable that on the Bakong official website, no mention is made of the guarantee. So until I have that concrete evidence, Bakong will remain in CBDC limbo.
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