Cambodia’s Unique DLT Payments Platform Aims to Minimize Dominance of US Dollar
The central bank of Cambodia (Banque Nationale du Cambodge – National Bank of Cambodia – NBC) intends to roll out a distributed ledger technology (DLT) network to pave way for greater interchangeability in the country’s remittance industry and to challenge the dominance of the US dollar.
Using the platform, consumers will be able to make almost instantaneous payments, using QR codes and a mobile app. While speaking at the “During Consensus: Distributed” event on May 11, Serey Chea, the assistant governor and director-general of the National Bank of Cambodia, disclosed that the main objective of the DLT network is to bring down the popularity of the US dollar.
Chea said “Cambodia is probably the most dollarized economy in the world. The whole financial system or actually our whole economy, [over] 90 percent […] is based on US dollars.”
She stated that DLT powered payment platform was under development for the past four to five years and would be rolled out soon. Chea said “We plan to go live in 2020, hopefully very soon.”
The platform was tested by 12 participating banks and it is anticipated that all the financial institutions operating in the country will become a member of the platform on their own interest.
The DLT powered platform of Cambodia has been structured to make it simpler for E-wallet providers, banks and bank clients to deal with each other.
She also pointed out that Cambodia has started building a “cross-border payment project” in collaboration with Maybank, top Malaysian financial institution, focusing on payments from migrant workers.
According to Chea, there was no valid justification for the country’s reliance on US dollar. She opined “the use of local currency is very minimal and the reason is more psychological than economic”
She further emphasized that several countries opting for “dollarization” demonstrate weak macroeconomic factors but:
“In the case of Cambodia, all our fundamentals are strong. We have a very stable exchange rate, very low inflation rate, and a very good economic outlook.”
Polls organized by the central bank indicate that the irrationality of carrying out day-to-day payments using Cambodian riel is the main cause of its absence of nationwide usage.
“One U.S. dollar is equal to 4,000 riels. If you were to spend on something that is worth an equivalent of 10 U.S. dollars then you have to pay 40,000 riels, and then as the value increases there are more zeros. […] From our survey, that makes life more complicated for many users.”
Chea further stated “We thought that if we were to make the payment in the electronic form, then people don’t have to be too bothered so much about the number of zeros and the inconvenience of carrying a lot of banknotes in their pocket.”