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Design of a CBDC in a Highly Dollarized Emerging Market Economy: The Case of Cambodia

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  • Kenichi Ueda

    (University of Tokyo)

  • Chanthol Hay

    (National University of Battambang)

Abstract

Cambodia is one of the two first countries that adopted a retail CBDC in October 2020. The design of the CBDC, called the Bakong, is a bit unique. We find a few design flaws that could potentially damage the central bank and then the Cambodian economy as a whole. We show some key statistics from our own survey in 2022 to clarify our arguments. The Bakong is offered in two currencies, the Khmer Riel (KHR) and the US dollar (USD), as Cambodia has been highly dollarized. We discuss theoretical predictions for the CBDC based on three kinds of substitutes: paper money, bank deposits, and foreign currencies. The third one is specific to the Bakong. Unlike a typical local currency CBDC, the USD Bakong may substitute for the KHR more. Moreover, it has been announced that the retail Bakong is legally not a liability of the central bank, but from the viewpoint of the underlying technology and economics, it is a central bank liability.

Suggested Citation

  • Kenichi Ueda & Chanthol Hay, 2024. "Design of a CBDC in a Highly Dollarized Emerging Market Economy: The Case of Cambodia," CARF F-Series CARF-F-579, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf579
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    2. Jitender Kumar & Manju Rani, 2025. "Past, present and future of central bank digital currency: a systematic literature review and relevant issues," Journal of Banking Regulation, Palgrave Macmillan, vol. 26(4), pages 701-720, December.

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