The National Bank of Cambodia (NBC) allows financial institutions to provide services related to backed cryptocurrencies, marking a cautious step into the digital asset market.
On December 27, the National Bank of Cambodia (NBC) officially announced a prakas (directive) allowing licensed commercial banks and payment institutions to provide services related to type 1 cryptocurrency assets, specifically backed or stable value cryptocurrencies.
This new regulation reflects Cambodia's efforts to engage with global financial innovation while maintaining control over unbacked cryptocurrencies like Bitcoin, which remain on the prohibited list.
New legal framework for backed cryptocurrencies
NBC's guidance focuses on regulating activities and businesses related to digital currency. Accordingly, financial institutions wishing to participate in this market must be approved by the NBC beforehand. Once licensed, they can perform services such as exchanges between backed cryptocurrencies and fiat money, transferring cryptocurrency assets between accounts, and providing custody services. However, the use of customer cryptocurrency assets for the organization's own purposes is strictly prohibited.
The above decision marks a significant shift in Cambodia's stance on cryptocurrencies. Previously, the country completely banned cryptocurrency transactions due to concerns about money laundering, fraud, and other illegal activities in the black market. The focus on backed cryptocurrencies demonstrates NBC's cautious approach to mitigate these risks while still allowing access to new technologies.
The development of cryptocurrencies globally, both in terms of payments and investments, has prompted Cambodia to reassess its policies. According to Hong Vanak, an economic researcher at the Royal Academy of Cambodia, cryptocurrencies, especially unbacked ones, are increasingly being traded like stocks due to their volatile values.
Nevertheless, he also noted the limitations of cryptocurrencies on the national economy. The digital and decentralized nature makes it complex to manage, tax, and monitor ownership.
However, allowing commercial banks and organizations to provide services related to backed cryptocurrency assets may create a new revenue source through service fees. This is a cautious step by Cambodia to balance seizing opportunities from new financial technologies while managing potential risks.