Kyrgyzstan's Parliament has approved a law defining the digital som, its CBDC, paving the way for legal tender status and prototype testing scheduled for early 2025.
Kyrgyzstan is gearing up to launch its central bank digital currency (CBDC), known as the digital som. In a landmark move, the country’s Parliament has approved a draft law that lays the foundation for its legal status and implementation framework.
Legal Framework for the Digital Som
Initiated by the Cabinet of Ministers, the legislation marks a critical milestone in one of Kyrgyzstan’s most ambitious financial initiatives. Once implemented, the digital som will serve as the nation’s official currency, recognized as legal tender throughout the country.
The National Bank of Kyrgyzstan will oversee its issuance, accounting, and distribution through a secure, centralized platform. This system is designed to prioritize efficiency and grant the central bank exclusive authority over currency issuance.
Prototype testing is slated to begin in early 2025, with full integration into Kyrgyzstan’s financial system anticipated by January 2027.
Kyrgyzstan’s Centralized Approach to CBDC
Unlike many global CBDC initiatives that rely on blockchain technology, Kyrgyzstan's strategy focuses on centralized management. While the digital som may include features like smart contracts, it avoids explicit reliance on blockchain due to the nation’s specific financial and technological environment.
To address Kyrgyzstan's inconsistent internet access, the platform will support both online and offline transactions. Offline payments will be stored locally on user devices and synchronized once connectivity is restored.
Digital accounts and wallets will be made accessible via banking apps and financial service providers, ensuring widespread usability and bridging the gap between traditional and digital financial systems.
Strategic Path to Implementation
Public consultations on the digital som began in August, including discussions on potential constitutional amendments.
Mels Attokurov, Deputy Chairman of the National Bank, emphasized the digital som’s potential to enhance financial stability and security. Additionally, the CBDC aims to promote financial inclusion by providing secure payment options in remote areas, aligning with global trends in digital finance.
By the end of 2026, after comprehensive testing, a decision on full-scale deployment will be made. If successful, Kyrgyzstan could emerge as a leader in CBDC adoption across Central Asia.
Global CBDC Landscape
Kyrgyzstan’s move is part of a global trend. According to the Atlantic Council, 134 countries, representing 98% of the global economy, are exploring CBDCs, up from 35 in 2020.
- 66 nations have advanced significantly, while countries like the Bahamas, Jamaica, and Nigeria have already launched retail CBDCs.
- Notable initiatives include China’s digital yuan (e-CNY), which has facilitated nearly $986 billion in transactions across 17 regions.
This global momentum addresses declining cash usage and increasing competition from cryptocurrencies like Bitcoin.
FAQs
1. What is Kyrgyzstan's digital som?
The digital som is Kyrgyzstan’s planned central bank digital currency (CBDC), designed to function as legal tender and integrate seamlessly into the national financial system.
2. When will the digital som launch?
Prototype testing begins in early 2025, with full implementation expected by January 2027.
3. How does the digital som differ from other CBDCs?
Kyrgyzstan’s digital som prioritizes centralized management and offline functionality, making it unique compared to blockchain-based initiatives.
4. What are the benefits of the digital som?
The digital som aims to enhance financial inclusion, modernize the financial system, and provide secure, efficient payment options, particularly in remote areas.
5. How does Kyrgyzstan compare to other nations in the CBDC race?
Kyrgyzstan is advancing rapidly in CBDC development, alongside nations like China, Nigeria, and Jamaica, which have already launched similar initiatives.
