Key takeaways:
- A draft law for establishing a Kyrgyz CBDC has been made available by the NBKR.
- Although the technology supplier for the digital SOMA platform has not yet been revealed, the platform operator will be designated by legal revisions regarding the national bank.
Draft law for establishing a Kyrgyz central bank digital currency (CBDC) has been made available by the National Bank of the Kyrgyz Republic (NBKR).
All of the laws are in the form of modifications, with the largest need for change coming from the Kyrgyz Republic’s payment system law and its constitutional law governing the national bank.
For the purpose of testing a digital som prototype in a sandbox setting, 12 businesses submitted concepts in March. The following month, the NBKR project team created a prototype CBDC on the blockchain of an anonymous applicant, but they did not choose a supplier.
Although the technology supplier for the digital SOMA platform has not yet been revealed, the platform operator will be designated by legal revisions regarding the national bank.
The bundle of revisions to other laws indicates that the proposed digital system would be intermediated, with “banks and the Central Treasury of the Ministry of Finance of the Kyrgyz Republic” as participants on the platform, having their accounts opened by the NBKR.
The participants would construct wallets for users—who may be “an individual, legal entity, or individual entrepreneur.”
Moreover, direct platform players would be the payment system operators and payment organizations providing the framework for digital SOM platform access.
In contrast to typical CBDC designs, the intermediary bank’s function would be to authenticate the user’s transaction and provide the operator (the NBKR) with an order for its execution. Digital seeds would be redeemed by users via an app:
“Digital soms are redeemed from the user’s digital wallet by exchanging digital soms for non-cash funds (into their bank account, electronic wallet, bank card), which are managed by the user of the digital wallet through a mobile application of payment system participants.”
The offline transaction feature is anticipated in the proposal. The legal tender would be the digital sum. Before the CBDC launched, the NBKR would create regulations for cybersecurity, privacy, and other technical matters.
Public comments on the draft laws are accepted until September 7. If approved, they would take effect on January 1, 2027.
With 7.2 million people living in Central Asia, the Kyrgyz Republic is home to a burgeoning crypto-mining sector made possible by abundant hydropower resources. The nation implemented rules governing crypto exchanges in 2021.
The Bank of England (BoE) is interacting with the corporate sector to get feedback on its creative roadmap for money and payments. In a recently released Discussion Paper, the central bank outlines its response to the swift changes in the payments landscape and their effects on financial and monetary stability.
