The National Bank of Cambodia unveiled the technical details of its forthcoming blockchain-based payments system named ‘Project Bakong’ this week. The central bank, which has been creating Project Bakong since 2017, sees its quasi-digital currency project as a high-tech revamp of the Khmer Riel, Cambodia’s official currency though rather its de facto cash choice, as locals have supported the U.S. dollar for decades, according to the white paper issued Thursday.

The central bank stated Bakong would help question the dollar’s reign by convincing Cambodians to pay instead through QR codes and a mobile app, with a Hyperledger Iroha blockchain facilitating real-time stock transfers among e-wallets plugged into their bank accounts. That permissioned blockchain will operate between Bakong accounts and traditional accounts, recording transactions on a distributed ledger, reach consensus through the block voting hash-based “Yet Another Consensus” algorithm, and process transactions in five seconds or less, according to the white paper.

“Transaction throughput is between 1,000 and 2,000 transactions per second,” depending on tech specs, the central bank said in the white paper. “This suggests that there is potential for this project to scale.” The bank stated that its system’s peer-to-peer nature eliminates the inefficiencies of centralized clearinghouse models without costing users anything to transact. 

“Since banks and individual users are now brought into one DLT platform, both banks and users no longer face interconnectivity and interoperability problems,” the central bank stated.

Quasi-digital currency

Cambodian officials have been reluctant to identify the fiat-backed Project Bakong a central bank digital currency (CBDC), in the past, instead of calling it a blockchain payment system. Users must load Riel into their Bakong accounts before they can transact with others. That’s diverse from a natively digital CBDC.

Even so, the white paper outlines Bakong against the increase of CBDC projects in highly developed countries. However while the paper stated such nations might turn to CBDC to approach their population’s falling cash use rates, in developing countries – a category in which Cambodia may remain for decades – it stated that CBDC could advance financial inclusion, improve inefficient payment systems and even decrease poverty by opening access.

The demographically-young and frequently tech-savvy population of Cambodia will possibly boost Bakong adoption, according to the bank. According to the paper, Cambodians are frequently porting their financial lives onto their phones: e-wallet accounts in the country climbed 64% in 2019 to a record of 5.22 million.

Mass adoption may grant the central bank a higher degree of control over Cambodia’s monetary policy by destroying the dollar’s decade-long local hold. Bank officials are already moving to oust the U.S. dollar: Last month, the central bank declared plans to phase out $1, $2, and $5 banknotes by the end of August. It is still unclear exactly when Project Bakong will fully launch. The white paper said “early 2020,” despite being published midway through the year.