President Sadyr Zhaparov of Kyrgyzstan has signed a law establishing the ‘digital som’ as legal tender, paving the way for a pilot project of a Central Bank Digital Currency (CBDC). The National Bank will oversee its issuance and regulation, with testing expected this year. The full implementation decision is projected for 2026, amidst global CBDC skepticism regarding privacy. Former Binance CEO will also advise on cryptocurrency regulation, leveraging the country’s renewable energy resources for crypto mining.
On April 17, Kyrgyzstan’s President, Sadyr Zhaparov, enacted a constitutional law that legitimizes the centrally issued digital currency, termed the ‘digital som.’ This law grants the National Bank of the Kyrgyz Republic exclusive rights to issue, regulate, and manage this digital form of the national currency. The law represents a significant step towards the potential deployment of a Central Bank Digital Currency (CBDC) pilot project.
Despite the progress, Kyrgyzstan does not anticipate a definitive decision regarding the formal issuance of the digital som until the end of 2026. Preparation for its issuance includes establishing necessary cryptographic safeguards to prevent fraudulent activities linked to the digital currency. Initial testing of the platform for the digital som is projected to occur within this year.
The president’s approval follows a recent amendment passed by Kyrgyzstan’s parliament, the Jogorku Kenesh, on March 18. The development of CBDCs continues to face skepticism from parts of the cryptocurrency community, who express concerns about potential violations of financial privacy and increased government surveillance.
Globally, while 115 nations have embarked on CBDC initiatives, only four have officially launched their digital currencies: the Bahamas Sand Dollar, Nigeria’s e-Naira, Zimbabwe’s ZiG, and Jamaica’s JAM-DEX. The majority of countries are still engaged in research and exploration of CBDC frameworks.
In addition to this legislative development, the former CEO of Binance, Changpeng “CZ” Zhao, has recently agreed to advise Kyrgyzstan on blockchain and cryptocurrency regulation. President Zhaparov expressed optimism, asserting that this collaboration is expected to bolster economic growth and enhance the security of virtual assets, thereby generating new prospects for businesses and society. Kyrgyzstan’s potential for cryptocurrency mining is bolstered by its abundant renewable energy resources, especially hydroelectric power, of which only a fraction is currently utilized according to the International Energy Agency.
Kyrgyzstan’s recent legal framework for the ‘digital som’ marks a pivotal development in the country’s digital finance landscape. While the path to actual implementation may take several years, this initiative reflects the nation’s broader interest in harnessing blockchain technology and advancing its economy. The collaboration with industry experts and logistical preparations highlight Kyrgyzstan’s strategic approach to embracing the future of digital currency and ensuring security in its applications.
Original Source: cointelegraph.com
