Kyrgyzstan’s president signs CBDC law giving ‘digital som’ legal status

Kyrgyzstan President Sadyr Zhaparov has signed a constitutional law authorizing the launch of a central bank digital currency pilot project while also giving the “digital som” — the national currency in digital form — legal tender status.

The law gives the National Bank of the Kyrgyz Republic the exclusive right to issue the digital som, establish the rules for its issuance and circulation, and oversee the platform on which the national currency will operate, Kyrgyzstan’s presidential office said on April 17.

However, a final decision on whether to officially issue the CBDC is not expected until the end of 2026, local outlet Trend News Agency reported in December.

If the central bank decides to adopt the digital som, it would also need to outline cryptographic protection measures to ensure the digital som remains secure and isn’t used for fraudulent transactions.

Testing of the digital som platform is expected to take place sometime this year.

Zhaparov’s sign-off comes nearly a month after Kyrgyzstan’s parliament, the Jogorku Kenesh, approved the amendment to Kyrgyzstan’s constitutional law on March 18.

CBDCs continue to be heavily criticized by some members of the crypto community, flagging concerns that they could undermine financial privacy and enable excessive government oversight, among other things.

While 115 nations have initiated CBDC projects, only four CBDCs have officially launched — the Bahamas Sand Dollar, Nigeria’s e-Naira, Zimbabwe’s ZiG and Jamaica’s JAM-DEX, data from cbdctracker.org shows.

Over 90 CBDC projects are yet to move past the research stage.

Earlier this month, former Binance CEO Changpeng “CZ” Zhao said he would begin advising Kyrgyzstan on blockchain and crypto-related regulation after signing a memorandum of understanding with the country’s foreign investment agency.

Zhaparov said the initiative would assist with the growth of the economy and the security of virtual assets, “generating new opportunities for businesses and society as a whole.”

Related: Bitcoin price levels to watch as Fed rate cut hopes fade

The mountainous, land-locked country is considered well-suited for crypto mining operations due to its abundant renewable energy resources, much of which is underutilized.

Over 30% of Kyrgyzstan’s total energy supply comes from hydroelectric power plants, but only 10% of the country’s potential hydropower has been tapped, according to a report by the International Energy Agency.

Magazine: Your AI ‘digital twin’ can take meetings and comfort your loved ones