Kyrgyzstan Takes the Plunge, Approves Pilot Project for Its Own Digital Currency Called the "digital som"

While countries like the U.S. and others in Asia are still thinking about the issuance of CBDC, Kyrgyzstan has taken a clear step forward.

While major countries like the U.S. and those in Asia are still contemplating the issuance of CBDC, Kyrgyzstan has taken a clear step forward. The country has approved a pilot project for its own digital money, which will be called the digital som and is a new version of the national currency. This new currency will be treated as legal tender if the CB goes ahead with issuing a CBDC.

Kyrgyzstan Testing To Launch CBDC

On April 17, President Sadyr Zhaparov signed a new constitutional law that not only gives the digital som legal status but also grants the country’s central bank full authority to manage its future.

The National Bank of the Kyrgyz Republic will decide on its operating principles, how it can be used by the public, and the timing of its planned release to the public.

At present, the final decision on the large-scale rollout of the CBDC will be made next year, and the testing phase is anticipated to commence in 2025. The country will soon begin a pilot project to evaluate the feasibility of introducing its own digital currency, with the final determination on full-scale launch expected next year.

What Makes This Special?

Unlike regular digital wallets or cryptocurrencies, a CBDC is issued and backed by the country’s central bank. This provides the security of a traditional currency with the speed and convenience of modern technology.

Countries like Jamaica, the Bahamas, and the European Union are already testing or using CBDCs, and Kyrgyzstan is now joining that group. In contrast, countries like the United States are still considering this option.

Why is Kyrgyzstan Opting For CBDC?

Kyrgyzstan is looking to modernize its financial system and make digital payments easier and safer. Earlier this month, former Binance CEO CZ said he would help Kyrgyzstan build strong crypto rules, which the government hopes will boost businesses and improve cybersecurity.

Kyrgyzstan is also a great location for crypto mining due to its abundant clean hydro energy. Although only 10% of its hydro power is currently utilized, over 30% of the country’s energy already comes from water sources.

With this digital som project, Kyrgyzstan is showcasing its readiness for the future of money to the world.