Kyrgyzstan is moving forward with its plans to fully roll out the national digital currency known as digital som.
A local report from December 11 indicated that the Kyrgyzstan Parliament had approved a draft law that established a regulatory structure for the central bank’s digital currency.
The National Bank of Kyrgyzstan (the country’s central banking institution) will now be able start prototype testing of the CBDC at the beginning of 2025.
The regulator’s decision will be made after the test period which should last until the end of the year 2026.
Early this year, discussions began about the plan to amend the laws in order to integrate digital banking into the financial system of the country.
The central bank introduced the proposed law in August. This will position it as sole regulator and issuer of CBDC.
The digital som is a relatively new technology, and the proposed law in parliament expects it to be able to use smart contracts.
Platform will allow for transactions between participants and the user, as well as interactions.
Digital wallets and accounts will be the basis for all transactions.
Digital wallets allow users to securely receive and send money via banking platforms and apps.
The system also supports both online transactions and offline ones.
The user will record offline transactions on their device, which will then be synced to the main network at a later date.
The central bank will manage the governance of the cryptocurrency. It will define the rules for the platform, control encryption keys and maintain the security and integrity of the platform.
The centralisation of digital music could have an impact on its use
The centralised nature of digital currency is often a factor which discourages people from adopting it. It contradicts their decentralised philosophy.
In the Reserve Bank of New Zealand’s consultation with the public on the potential CBDC, it was revealed that most respondents expressed concern about the government controlling the market, and cited increased traceability as a key issue.
Similar concerns over government control, increased financial surveillance, and decreased privacy may arise as the National Bank of Kyrgyzstan plans to centralise governance of the digital som. This could impact public adoption and trust.
CBDC Plans Around the Globe
Many jurisdictions around the world are considering the introduction of state-backed currency.
India has, for example, been testing its digital rupees since 2022. It has also implemented various features, and is working to integrate CBDC into the existing payment infrastructure.
The Reserve Bank of India, however, has urged caution and emphasized the importance of not rushing retail deployment.
The Philippines completed its proof-of concept for digital wholesale currency at the central bank.
The CBDC, also known as Project Agila is a distributed ledger-based system that enables secure interbank funds transfers around the clock.
The post Kyrgyzstan develops national digital currency plans can be updated as new information becomes available.
