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Tajikistan to Build Central Bank Digital Currency with the Help of Fantom Foundation

Tajikistan to Build Central Bank Digital Currency with the Help of Fantom Foundation
Image Source: Shutterstock

Fantom Foundation is an open-source smart contract platform for decentralized applications and digital assets. It uses aBFT consensus protocol to deliver unmatchable security, reliability and speed.

The growing popularity of cryptocurrencies has made many countries build their Central bank digital Currencies to control the effect of private digital currencies. Tajikistan has also joined the race to launch its CBDC.

Recently, Fantom Foundation announced its partnership with one of the biggest banks in Tajikistan to launch the country's Central Bank Digital Currency for the Republic of Tajikistan.

We’re extremely excited to announce that Fantom will work with OJSC Orienbank to trial a CBDC for Tajikistan.

The solution will also use the @AndreCronjeTech Iron Bank protocol to enable seamless, low-fee foreign exchange.

~Twitter (FantomFDN)                                          

With this agreement with the OJSC Orienbank, Fantom has become one of the first blockchain protocols to build a digital currency.

What does the agreement say?

Orienbank and Fantom Foundation will leverage the technology stack of Fantom for digitalizing the Tajikistani Somoni for commercial payments. Also, Andre Cronje’s Iron Bank protocol will be integrated to enable low fee foreign exchange.

There will be an initial phase of testing and refinement of this CBDC solution, and after that, it will be nationally rolled out by Fantom and Orienbank. The government is seeking a transition to a digital economy, and Fantom is considered to be a key solution provider because of its fast spending, almost zero fees and deterministic transaction finality.

Let's understand what will be the critical features in CBDC launched by Fantom:

Remittance costs are a significant concern for the economy of Tajikistan. Before the pandemic, remittance inflows were comprising of 26% of the country’s GDP. Fantom solutions will eliminate the intermediaries, which will lead to a drastic reduction in remittance costs.

Secondly, Fantom will facilitate low-cost P2P payments via mobile CBDC wallets that will support local commerce. This mobile connectivity will help the underserved areas to have access to vital services such as microloans. Fantom CBDC also ensures financial stability in case of disruption within card payment networks and legacy interbank via a parallel payment rail.

What does CBDCs mean to Tajikistan?

In Tajikistan, cryptocurrency is always a topic of controversy. These aren't either legal or illegal in the country. In 2018, the National Bank of Tajikistan issued a statement stating that cryptos aren't an official means of exchange and warned against the growing risks of cyber-attacks in the use of digital currencies.

Also, according to a report, Tajikistan will be the least cyber secure country in the world in 2021. The launch of CBDC is a step towards the digital transformation of the economy of Tajikistan, and it will help to build cashless payments. The digital transformation of Tajikistan can help the country to be more competitive and to create new opportunities in the long run.

CBDC is a digital currency but not comparable to Bitcoin   

A Central Bank Digital Currency is actually a virtual currency issued by the country's central bank. It is just like a fiat currency because it is exchangeable one-to-one with the fiat currency of any country; it differs in its form.

The introduction of CBDC is essential for any country because it can lead to a more robust, trusted, regulated, and efficient system because there will be reduced dependency on cash and reduced settlement risks.

A CBDC cannot be compared with any private cryptocurrencies, including Bitcoin, because a CBDC is well-regulated by the central government.

Closing Thoughts

People usually believe that CBDCs cannot be used for foreign exchange, which could be a limitation of a central bank Digital Currency. But, with the integration of Andre Cronje's iron Bank, Tajikistan's CBDC will elegantly resolve that limitation. Also, the users who are in search of an easy-to-use alternative to other cryptocurrencies, Fantom CBDC is an excellent alternative because it safeguards monetary sovereignty.