Kyrgyzstan has enacted a law allowing the digital som, the central bank digital currency, to have legal tender status. The National Bank will oversee its issuance and security. Official adoption may not occur until late 2026. In parallel, efforts to integrate cryptocurrency regulations are underway, supported by former Binance CEO Changpeng Zhao. Kyrgyzstan’s rich renewable energy resources enhance its appeal for crypto mining operations.
Kyrgyzstan’s President, Sadyr Zhaparov, has enacted a constitutional law to initiate a pilot project for a central bank digital currency (CBDC) and grant legal status to the ‘digital som,’ the digital version of the national currency. According to the presidential office’s statement on April 17, the National Bank of the Kyrgyz Republic will possess the exclusive authority to issue the digital som, regulate its issuance and circulation, as well as manage the operational platform.
Although the constitutional law was approved by Kyrgyzstan’s parliament on March 18, the official decision regarding the issuance of the CBDC is not anticipated until the conclusion of 2026. If the central bank advances with the digital som, it must implement cryptographic security measures to safeguard the currency and prevent fraudulent activities. Testing for the digital som platform is projected to commence later this year.
The CBDC initiative faces skepticism from segments of the cryptocurrency community, who voice concerns regarding potential impacts on financial privacy and the risk of increased government oversight. Despite 115 countries launching CBDC projects, only four—namely the Bahamas Sand Dollar, Nigeria’s e-Naira, Zimbabwe’s ZiG, and Jamaica’s JAM-DEX—have become operational, as reported by cbdctracker.org, while over 90 remain at the research phase.
Furthermore, Kyrgyzstan is advancing its engagement with cryptocurrencies. Recently, former Binance CEO Changpeng “CZ” Zhao announced plans to advise the country on blockchain and cryptocurrency regulations following a memorandum of understanding with Kyrgyzstan’s foreign investment agency. President Zhaparov emphasized that this partnership will foster economic growth and enhance the security of virtual assets, creating new opportunities for businesses and society.
The nation, known for its mountainous terrain, is well-positioned for cryptocurrency mining due to its abundance of renewable energy resources. Currently, over 30% of Kyrgyzstan’s energy is derived from hydroelectric power, although only 10% of its potential hydropower capacity has been harnessed, according to the International Energy Agency.
Kyrgyzstan’s recent adoption of legislation for a central bank digital currency marks a significant step in the evolving landscape of digital finance. While the digital som has yet to be officially launched, the groundwork laid by the National Bank and ongoing developments in crypto regulatory frameworks are poised to position Kyrgyzstan as a notable player in the digital economy. Nonetheless, ongoing evaluations of financial privacy and regulatory implications are essential as the nation explores this innovative approach to currency and economic development.
Original Source: cointelegraph.com
