The National Bank of Kazakhstan (NBK) is using R3′s Corda platform for the ongoing pilot of a central bank digital currency (CBDC), the digital tenge, the bank said in a report published Wednesday.
NBK highlighted Corda’s capacity to maintain “anonymity, confidentiality and traceability of transactions,” and open-source code. Sweden, Japan, Canada, Switzerland, South Africa, France and the European Union have also started successful CBDC projects based on Corda,” the report said.
The 99-page document examined the CBDC pilot, which launched in May and involves two of the country’s larger commercial banks, Kaspi Bank JSC and Eurasian Bank JSC. The report, the second produced this year on a possible tenge, considered CBDC use cases and potential monetary and financial impacts, among other issues.
In the two-tier CBDC model that NBK is exploring, the central bank supervises the whole system and smaller banks open digital tenge wallets for users to “exchange, redeem, restore the D[igital] T[enge] and make interbank transfers,” the report said.
Similar to cash, the digital tenge tokens will not be recorded on banks’ balance sheets, only in users’ digital wallets, ensuring that tenge transactions are different from bank wire payments.
The token can be programmed so that only authorized public institutions can distribute funds and individuals will have limited ways to spend them, the report said. For example, public funds can be specifically allocated for medical programs.
The report struck an optimistic tone that a digital tenge could foster more financial inclusion. More than one in five people in Kazakhstan do not have access to banking and this trend is particularly pronounced in rural areas, where a large number of individuals continue to use cash for retail transactions. Cashless payments make up roughly 77% of all transactions, the report noted.
The document also suggested that a CBDC should be available offline to ensure that people without internet access can also use such a currency, although it saidthe technological solutions preventing double-spending in such cases have yet to be developed.
The report noted that CBDC projects worldwide are in development stages. While “most central banks have already joined the race, however, there is no mature and well-established practice yet - this is still an area for research and experimentation,” the report said.
NBK is planning to complete more trials and studies until July 2022 before deciding whether to launch the digital tenge in December.
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