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Journalist
Hassan Shittu
Journalist
Hassan Shittu
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Kyrgyzstan has taken a significant step towards launching its central bank digital currency (CBDC), the digital som. In its first reading, the Parliament approved a draft law that establishes its framework and legal status.
According to a report from Trend, the legislation was Initiated by the Cabinet of Ministers and is poised to set the groundwork for one of the nation’s most ambitious financial projects.
Once fully implemented, the digital som will function as Kyrgyzstan’s national currency and be recognized as legal tender nationwide. The National Bank of Kyrgyzstan will oversee its issuance, accounting, and distribution through a centralized platform. This platform, designed for security and efficiency, will grant the central bank exclusive rights to issue the currency.
Testing for the prototype is scheduled to begin in early 2025, with full integration into the nation’s financial ecosystem expected by January 2027.
Kyrgyzstan Digital Som: A Centralized CBDC?
Unlike many global CBDC initiatives that lean heavily on blockchain and distributed ledger technologies, Kyrgyzstan’s approach prioritizes centralized management under the National Bank.
The digital som’s framework will integrate features like smart contracts, but avoid explicit reliance on the blockchain. This is mainly because the country is tailored to its specific financial and technological landscape.
The platform supporting the digital som aims to enable both online and offline transactions, a critical feature for Kyrgyzstan, where internet access can be inconsistent.
Transactions made offline will be stored locally on user devices and synchronized with the platform once connectivity is restored.
However, implementing offline functionality presents technical challenges, which have also been a subject of global debate among central banks exploring similar CBDC features.
To ensure widespread accessibility, the proposed system will offer digital accounts for participants and digital wallets for individuals. These wallets will be accessible through banking apps and other financial service providers, bridging the gap between digital innovation and traditional monetary systems.
Path to Implementation and Strategic Considerations
Public consultations on the digital som began in August, including discussions on necessary constitutional amendments to facilitate its integration.
Deputy Chairman of the National Bank, Mels Attokurov, emphasized the digital system’s security advantages. Attokurov frames it as a tool to modernize Kyrgyzstan’s financial system while ensuring stability.
The government envisions the digital som as a step towards greater financial inclusion, particularly in remote areas.
It aims to provide secure, efficient payment options for all citizens, aligning with broader global trends in digital finance.
Following extensive prototype testing and feedback, the National Bank will decide on full-scale deployment by the end of 2026.
If successful, the digital som will solidify Kyrgyzstan’s position as a leader in adopting digital currencies within Central Asia.
Kyrgyzstan is not the only one in the CBDC endeavor. According to the Atlantic Council’s latest report, 134 countries, representing 98% of the global economy, are actively exploring central bank digital currencies (CBDCs), a significant rise from 35 in 2020.
Of these, 66 nations have made advanced progress, with countries like the Bahamas, Jamaica, and Nigeria already launching CBDCs and expanding their retail applications. Additionally, 44 countries, including Australia, Indonesia, Singapore, and Malaysia, are running CBDC pilot programs.
This global effort aims to address declining cash use and competition from cryptocurrencies like Bitcoin.
Among major initiatives, China’s digital yuan (e-CNY) leads with nearly $986 billion in transactions across 17 regions, a significant increase from $253 billion the previous year. This initiative impacts key sectors like education and tourism.
