Cambodia is one of the most dollar-reliant economies in the world and its pending introduction of a blockchain payment platform has caused a small panic.
Blockchain is a digital system allowing instant payments for transactions of any size, and with it the National Bank of Cambodia says that it plans to phase out the use of the U.S. $1, $2 and $5 Federal Reserve notes by Aug. 31. This confused the local community and triggered rumors that the use of the three bills would then be banned. The controversy started when Chea Serey, director of the National Bank of Cambodia said in the Khmer Times on May 28 that the blockchain would make the local economy less reliant on the U.S. dollar.
Within days, Prime Minister Hun Sen clarified to the paper that the U.S. currency was not banned and still widely used, adding a caveat, “In the event of a halt to the circulation of the said US bills, an official announcement from the National Bank of Cambodia will be released to the public.”
He added, “All Citizens, please continue spending freely the said banknotes in the Kingdom without any loss in exchange rates or additional charges.”
The remarks did not stop the panic. The Khmer Times observed that merchants in Phnom Penh’s Kandal Market did not want to accept $1 bills lest they be “rendered useless in the coming months.” One told the Times he would not accept them for fear of being stuck with them in the future. Some gas stations and tuktuk drivers were also refusing them.
The desire to phase out the low value U.S. currency is understandable. Even though they are officially recognized as tender, they are difficult and costly to manage and transport.
The Cambodian bank is establishing a three month period from June 1 to Aug. 31 for banks and microfinance institutions to collect $1, $2 and $5 bills so it can send them to a foreign country. There will be no service charge during this period. After Aug. 31, the cost of exporting the notes will be for the institutions. There will be no charge for accepting $10 notes and the bank will negotiate with banks and microfinance institutions the exact date to stop accepting the small U.S. bank notes.