The Bank of Papua New Guinea explores the benefits of digital kina

The development of digital kina is a collaborative effort which involved the central bank and Japan-based companies Soramitsu and Mitsubishi, supported by funding and input from the Japanese government.

Advancing digital transformation in Papua New Guinea

The exploration included technical tests conducted in the field over the past months and it is described by the central bank’s governor as an important first step of CBDC efforts and a way to evaluate the feasibility of introducing digital currency.

It focused on finding out how a CBDC can be integrated into the country’s existing payment system to address some challenges that the financial sector is facing. Work to date enabled the central bank to identify the potential benefits of CBDC, gain feedback from users and merchants, and asses the operational and infrastructural demands required for scaling up a broader pilot phase.

Those involved in the study simulated the core functions of a digital currency system with central bank employees, as well as staff from the Japan International Cooperation Agency (JICA) and Japanese Embassy. They tested digital payments and transaction security under a controlled environment.

The initiative stems from the rapid advancements in digital financial technologies globally, which improved payment systems and financial inclusion. With an increasing number of Papua New Guinea’s banks and institutions adopting new platforms to meet customer needs, the country’s economy is undergoing digital transformation as well. The bank aims to ensure that the country’s financial infrastructure can accommodate these changes.

The results note that a CBDC could cut reliance in physical currency, reduce cash-handling and distribution costs, and improve transaction efficiency. Other advantage includes better security as the blockchain tech underpinning CBDCs provides a safe platform for transactions, reducing the risk of counterfeiting and fraud. It also promotes financial inclusion by providing a digital payment option accessible to businesses and individuals in both urban and remote areas.