As a seasoned analyst with over two decades of experience in the global financial sector, I find Kyrgyzstan’s move towards integrating its own digital currency intriguing and forward-thinking. Having witnessed the rapid transformation of various economies into digitized landscapes, it is evident that nations like Kyrgyzstan are not only keeping pace with this change but also leading the way in some instances.
As a dedicated researcher, I find myself delving into the exciting realm of financial innovations. In the heart of Central Asia, I’ve been closely following developments in Kyrgyzstan. Recently, an intriguing proposal has surfaced from their central bank – one that aims to legitimize their digital currency as a legal tender. This step, if taken, could pave the way for a new era of digital financial transactions within the nation’s borders.
The Central Bank of Kyrgyzstan is starting conversations with the public about changing the constitution to allow for the use of their own digital currency (called digital som) within the country’s financial structure. This move signifies a significant stride towards an economy that is more digitally based.
According to the changes presented on August 8, the digital version of the som will be connected to the financial infrastructure using a “central bank-managed software system.” The draft document does not explicitly use terms like “blockchain” or “distributed ledger,” but it does reference “smart contracts,” which means that some aspects of the platform’s technical workings remain vague.
The design of this system features the addition of “electronic bank accounts” and “online wallets.” Electronic bank accounts are accounts controlled by the platform operator for its users, while online wallets serve as personal tools for transactions. These wallets can be accessed using apps provided by banks and other financial institutions collaborating with the platform.
Central bank controls encryption keys
On the self-operating digital SOm platform, interactions and transactions can occur between the platform operator, participants, and users. The guidelines for this platform, to be set by the National Bank, will outline the duties and rights of each participant, access requirements, and the kinds of transactions that are allowed.
According to the proposal, the central bank will serve as the manager for the digital som platform. This means it will be responsible for the creation, tracking, and safety of digital soms. Additionally, it will ensure the platform operates efficiently and securely, implementing measures like data encryption and authentication systems.
The system enables users to make transactions, either online or offline. Offline transactions let users carry out transfers without needing an internet connection. These transactions are saved on the device and then synced with the platform at a later time.
By early 2027, it’s anticipated that the national financial infrastructure will embrace the digital currency completely, ensuring a regulatory structure in step with global advancements in digital currencies.
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2024-08-09 13:08