Kyrgyzstan has moved ahead with plans for a full rollout of its national digital currency, the digital som. According to a local media report on December 11, the Kyrgyzstan parliament has approved the draft version of a law that establishes a regulatory framework for its central bank digital currency (CBDC). With this approval, the National Bank of Kyrgyzstan, the country’s central bank, will be able to begin prototype testing for the CBDC in early 2025. After the testing period, which is expected to last through the end of 2026, the regulator will issue its decision on a nationwide rollout. Discussions over the plans to amend laws to integrate the digital som into the country’s financial system began earlier this year. In August, the central bank proposed the law, which will positioned it as the sole issuer and regulator of the CBDC. Very little is known about the digital som, but it is expected to leverage smart contracts according to the draft law presented in the parliament. The platform will facilitate transactions and interactions between the operator, participants, and users. The system will include digital wallets and digital accounts, which will act as the foundation for transactions. Digital accounts will act as a centralised record managed by the platform operator, while digital wallets will let users securely send and receive money through banking apps and financial platforms. Further, the system will support both online and offline transactions. Offline transactions will be recorded on the user’s device and will be synchronised to the main network later on. Governance for the cryptocurrency will be managed by the central bank, which will oversee the issuance and accounting of digital soms, define platform rules, manage encryption keys, and ensure the platform’s security and operational integrity. Centralisation could impact digital som use Centralised control is a concerning factor that often deters the public from fully trusting and adopting digital currencies, as it contradicts the decentralised ethos many associate with cryptocurrencies. For instance, the Reserve Bank of New Zealand’s public consultation on its potential CBDC revealed that the majority of respondents were concerned about government control, citing increased traceability and reduced privacy as key issues. With the National Bank of Kyrgyzstan planning centralised governance for the digital som, similar concerns about government control, financial monitoring, and reduced privacy could arise, potentially impacting public trust and adoption. CBDC plans across the globe Several jurisdictions across the globe are mulling the launch of their respective state-backed currencies. India, for instance, has been testing the digital rupee since 2022 and has gradually implemented various features and plans to integrate the CBDC with the nation’s existing payment infrastructures. However, the Reserve Bank of India has advocated for a cautious approach, emphasising the need to avoid rushing the retail rollout. Elsewhere, the Philippines recently completed the proof-of-concept of its wholesale central bank digital currency. Dubbed Project Agila, the CBDC is designed to enable secure, round-the-clock interbank fund transfers using distributed ledger technology. The post Kyrgyzstan advances national digital currency plans appeared first on Invezz
