Kyrgyzstan advances plans for national digital currency: report

Kyrgyzstan’s future national virtual currency, the digital som, has moved closer to reality with the approval of the draft law establishing its framework by the parliament.

Kyrgyzstan’s Parliament approved in its first reading a bill defining the status and legal framework of the digital som, the country’s central bank digital currency, Azerbaijani media outlet Trend reported.

The National Bank of Kyrgyzstan, which will oversee the issuance and operation of the digital som, plans to start prototype testing in early 2025. The report states that after successful trials, a decision on full implementation is expected by the end of 2026. Once adopted, the digital som will serve as legal tender, to be issued exclusively by the central bank through a dedicated platform that manages its distribution, accounting and security.

It was understood that the digital som platform was designed to support both online and offline transactions and provides accessibility even in areas with limited internet connection. Offline transactions will be stored locally on devices and synced with the platform once internet access is restored.

However, it remains unclear how the National Bank of Kyrgyzstan plans to address challenges in implementing offline functionality, a feature that has raised feasibility concerns among various central banks globally.

In August, the Central Bank began public discussions on constitutional amendments to support the integration of digital currency. The proposed system includes digital accounts for platform participants and digital wallets for individual users that can be accessed through banking applications and other financial institutions.

Unlike many central bank digital currency initiatives that emphasize blockchain, Kyrgyzstan’s draft law avoids explicitly mentioning distributed ledger technology. Instead, it incorporates smart contracts and emphasizes centralized management within the Central Bank. Full integration of digital som into Kyrgyzstan’s financial ecosystem is planned by January 2027.