Kyrgyzstan on the Path to Creating a Digital Som

What Steps is Kyrgyzstan Taking to Create a Digital Currency?

Like many other countries around the world, Kyrgyzstan is researching and defining an approach to introducing a national digital currency and testing the concept of the digital token (PoC).

On May 25, 2022, the Board of the National Bank of the Kyrgyz Republic (hereinafter referred to as the National Bank) adopted the Digital Som concept.

According to this concept, Kyrgyzstan’s CBDC is based on a chosen two-tier retail model that meets the interests of financial market participants, the state, businesses, and users. While the model is rooted in traditional banking principles, its distinguishing feature is the integration of modern technological solutions and innovative approaches.

The Role of the Digital Som in Monetary Circulation

Currently, there are two forms of national currency in Kyrgyzstan: cash soms, issued by the National Bank, and non-cash soms, in the form of funds in accounts held at commercial banks and the National Bank. Correspondent accounts at the National Bank are available only to a limited number of participants — commercial banks and the Central Treasury of the Ministry of Finance of the Kyrgyz Republic.

The digital som will become an additional form of the national currency of the Kyrgyz Republic (the Kyrgyz som), which will be issued by the National Bank in digital form and will constitute its liability.

The digital som will combine the properties of both cash and non-cash soms. For example, while cash soms are issued as physical (tangible) banknotes (each with a unique serial number) and coins, and non-cash soms exist as entries in accounts at commercial banks, the digital som will be a unique digital token (in non-physical form) that will be stored in a special digital wallet. The transfer of digital soms from one user to another will occur through their movement from one digital wallet to another digital wallet of the holder, and it will also be possible to transfer digital soms to existing banking payment instruments (bank cards and electronic wallets).

Alongside cash and non-cash soms, the digital som will be used, performing all the functions of money: a medium of exchange (payment), a measure of value, and a store of value. All three forms of the national currency will be equivalent: one cash som will be equal to one non-cash som, and one digital som will be equal to each of them. Holders of money will have the ability to freely convert soms from one form to another. However, certain restrictions (limits) on such operations may be imposed.

Platform Architecture and Design

For the successful implementation of the digital som, the concept provides ...

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