Dollarization in Cambodia: why the USD dominates and what Bakong changes

Cambodia is one of the rare countries in the world where the US dollar circulates freely alongside the national currency, the riel (KHR). This dollarization, inherited from the UNTAC mission in 1992, now affects 80% of transactions. For an expat, understanding this dual-currency system is essential: your salary arrives in USD, your rent is in USD, but change is given in KHR at an often unfavorable rate. Since 2020, the National Bank of Cambodia's (NBC) Bakong project aims to reduce dollar dependence by facilitating digital riel payments, with recent interoperability with Thailand, Laos, and Malaysia. This article explains the origins, mechanisms, and what could change in the next 5 years.

Cambodian dollarization dates back to 1992, when the United Nations Transitional Authority (UNTAC) massively injected dollars to pay its soldiers and officials. After UNTAC's withdrawal, dollar usage remained entrenched, particularly in real estate, rent, salaries, and wholesale trade. Today, the riel is used for small daily transactions (markets, transport) and as change.

The official exchange rate is approximately 4,000 KHR per 1 USD, but banks and ATMs apply margins. Automated teller machines often offer KHR withdrawals at a less favorable rate than the interbank market.

Bakong, launched in 2020 by the NBC, is a peer-to-peer digital payment system based on blockchain. It allows users to transfer money in riel or dollars via a mobile app without going through traditional banks. By 2025, Bakong became interoperable with QR codes from Thailand, Laos, and Malaysia, facilitating cross-border payments.

For a European expat, Cambodian dollarization presents advantages and disadvantages. On the positive side: no exchange rate fluctuation between the euro and dollar for local expenses (if you're paid in USD). Rent and services are stable. However, if you receive a salary in euros, you face a double conversion (EUR → USD → KHR) that can cost 2 to 4% depending on intermediaries.

Compared to Thailand or Vietnam, where the local currency is exclusive, Cambodia offers flexibility: you can pay in USD without conversion. But watch out for change in KHR: merchants often apply a rate of 4,100 KHR per 1 USD, which is 2.5% less than the official rate. Conversely, Bakong allows you to avoid these fees by using digital riel, but adoption remains limited to major cities.

Our verdict: the current system is convenient for expats managing accounts in USD. For nomads with euro income, it's better to use a multi-currency account (Revolut, Wise) and withdraw in USD from ABA ATMs (free).

• Open a USD account with ABA. ABA is the most reliable bank for expats: free ATM withdrawals, simple international transfers, English-language app.
• Avoid withdrawing in KHR. Always prefer USD withdrawal. If an ATM offers a choice, select USD. The exchange rate applied by the ATM for KHR is often unfavorable.
• Use Bakong for small payments. Download the Bakong app (available in English) and fund it with riel from your ABA account. You'll pay without fees at partner merchants.
• For international transfers, use Wise. Wise converts your euros to USD at the real rate, with fees under 1%. Then transfer to your ABA account.
• Keep some riel in cash. For local markets, tuk-tuks, and small shops, riel is king. Withdraw 100,000 KHR (about $25) per month.

• Change given in KHR at unfavorable rate. When you pay $5 for a $4.50 item, the merchant gives you 2,000 KHR (worth $0.50 at 4,000 rate). But they often use a 4,100 rate, costing you $0.05. For large purchases, ask for change in USD.
• Non-ABA ATMs. ATMs from banks like Canadia or ACLEDA charge $5 per withdrawal and apply poor exchange rates. Use exclusively ABA ATMs (free for ABA customers).
• Double conversion with Bakong. If you fund Bakong in USD, conversion to riel happens at the NBC rate, which may be worse than market rate. Prefer funding in riel directly.
• False idea of rapid dedollarization. The NBC talks about gradual dedollarization, but nothing will change soon. Don't worry: USD remains king for the next 5 to 10 years.

Cambodian dollarization is an asset for expats paid in USD: stability, simplicity, no exchange fees. For nomads with euro income, it requires some organization (multi-currency account, ABA withdrawals). Bakong is a promising innovation, but usage remains marginal. In 5 years, expect digital riel to grow, but don't expect the dollar to disappear. In the meantime, keep your USD and use ABA for daily operations.