Cambodia now allows banks to offer services for stable cryptocurrencies, excluding volatile tokens like Bitcoin.
NBC mandates prior approval for banks to transact or custody crypto, enhancing consumer protection.
The new Cambodian crypto policy aims to boost the economy and reduce reliance on the U.S. dollar.
The National Bank of Cambodia (NBC) has made a remarkable change in financial regulation by allowing commercial banks and payment institutions to interact with Category 1 crypto assets, which consist of stable cryptocurrencies. This decision was accomplished in the prakas released on December 26th. The bank excludes unbacked cryptocurrencies such as Bitcoin and Ethereum and remains cautious towards more volatile digital assets.
Saving Consumers and Shaping Financial Innovation
Under the new new direction, no financial institutions will be allowed to provide any cryptocurrency services without the approval of NBC. Only approved entities will be allowed to exchange crypto to fiat and back, transfer cryptoassets within accounts, and offer services in custodianship. These institutions are restricted from utilizing the client’s crypto assets for their gains, thereby protecting the consumer.
The initiative to approve Category 1 crypto assets is a step toward implementing digital currencies as an integral part of the official financial landscape. Cambodia’s actions resemble those of other countries that control the use of digital currencies, which boost the economy and encourage the creation of new products.
However, NBC’s policy remains to prohibit dealings in unbacked cryptocurrencies because of their variability and vulnerability to misuse, even though there is support for backed cryptocurrencies.
Digital Finance Opportunities and Challenges
Economic researcher at the Royal Academy of Cambodia, Hong Vanak, mentioned that cryptocurrencies are emerging as a trending means for buying and selling goods and trading. Yet, their digital and decentralized character makes their regulation, taxation, and exercising ownership rights very problematic.
Similarly, he pointed out that if commercial banks decide to offer crypto asset services to their clients, then universal revenue through user fees will be possible for the national economy in the long run.
Stablecoins and other digital currencies backed by the USD give Cambodia a proper approach to improving its monetary systems and diversifying its dependency on the USD, as it was for NBC Governor Chea Serey. This may strengthen the Cambodian local currency and position the country as a participant in the evolving global digital economy.
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