Cambodia is launching a distributed ledger technology network for the country’s payment system. The new network is aimed at boosting the use of the local riel currency and cutting down the use of the U.S dollar. It will facilitate real-time payments, and the country hopes to drastically bring down the cost of payments.
While it will have many benefits for its users, the new payment’s primary goal is to reduce the use of the U.S. dollar. Serey Chea, the assistant governor of the National Bank of Cambodia said at a recent event that the U.S. dollar accounts for over 90% of the local payments. This makes Cambodia one of the most dollar-dependent economies in the world.
The DLT payment network is Cambodia’s best chance of cutting down the use of the dollar, and the central bank intends on exploiting it fully. Chea revealed that the regulator intends on launching it this year, “hopefully very soon.”
The new network will bring together the banks and e-wallets providers, allowing the users to transact among themselves. Currently, the network has 12 of the country’s banks, with Chea expressing confidence that all the financial services providers in the country will join.
The network will also extend to cross-border funds transfers with the neighboring Malaysia. Malaysia has over 30,000 Cambodians working there and every month, they send funds back home to their families. Unfortunately, the charges are exorbitant and end up taking up to 30% of the funds. The new system will cut down these charges drastically, enabling the swift movement of funds back to Cambodia.
The new system will also allow direct payments by the workers to institutions in Cambodia. They can, for instance, directly pay school fees for their children without having to send the money to their families first. This will cut down the costs even further, but more importantly, it will ensure the funds are spent on the intended purpose and not squandered by the recipients.
Cambodia’s use of the U.S. dollar is an anomaly, Chea pointed out. Usually, countries that rely heavily on the dollar have poor economies and high inflation. Not Cambodia, she noted, stating, “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.”