Cambodia’s central bank digital currency (CBDC), Bakong, will become the foundation for an expanding international payment system for Asian countries

Japanese fintech Soramitsu has joined a new international project to enable payments between Cambodia, Japan, and other Southeast Asian countries.

The project is funded by the Japan International Cooperation Agency (JICA). It aims to facilitate low-cost and secure remittances as well as e-commerce transactions. The developed system will comply with the regulatory and legal frameworks of each country, as well as the international AML and CTF standards.

The new project is called Mutsumi, which means “friendly relations.” The cross-border payment system will use Cambodia’s CBDC Bakong and various stablecoins to facilitate e-commerce transactions between Japanese SMEs and Southeast Asian customers. It is expected to launch somewhere in late 2024.

Cambodia’s Bakong was chosen as a foundation for the new system as it already has cross-border integrations with QR-code-based systems in Malaysia, Thailand and Vietnam. Further interconnectedness will include India, China and Laos.

During its short existence, Bakong has already gotten 8.5 million users and a transaction volume of around $15 billion.

Besides, Cambodia has the US dollar as the main currency. Arguably, it makes foreign exchange a little easier.

Therefore, instead of creating separate connections with every Asian country, Japan will hopefully leverage Cambodia’s Bakong to perform international transactions. The linkage will use a Japanese stablecoin rather than local CBDC – digital yen. FX coin exchange will serve as an intermediary.

The choice of a stablecoin as a payment means for Japan may be linked to the fresh bill passed in June, aimed to protect investors when using stablecoins. According to the new legislation, stablecoins must be tied to the yen or another legal tender within the country. Only licensed banks and trust companies can engage in the issuance of these digital assets.