The National Bank of Cambodia has recently allowed commercial banks and payment firms to provide services related to Category 1 crypto assets, but not for standalone cryptocurrencies like Bitcoin and Ethereum. This decision, announced on Dec. 27, permits institutions to deal with cryptocurrencies backed by fiat such as stablecoins like USD Coin and USDT, as well as central bank digital currencies. However, all financial entities must obtain approval from the central bank before offering any crypto-related services, including the conversion of crypto to fiat currencies and vice versa, facilitating cryptocurrency transfers between accounts, and providing custody services. It is important to note that the use of clients’ crypto assets for the financial institution’s benefit is strictly prohibited.
Prior to this new development, Cambodia had prohibited its citizens from engaging in crypto transactions or trading due to concerns about the high volatility of virtual assets and the potential for illicit activities such as money laundering and fraud. The country recently took steps towards embracing the crypto industry by allowing services related to Category 1 crypto assets, indicating a shift towards digital currencies pegged to fiat. This move aligns with a global trend seen in other countries like Hong Kong, the U.S., and UAE, although Cambodia is still in the early stages of this transition.
In a separate development, Cambodia recently blocked 16 major crypto exchanges, including Binance, OKX, and Coinbase, for failing to secure licenses from the country’s Securities and Exchange Regulator. These licenses are required for operating within Cambodia’s regulatory framework. Despite this cautious approach towards cryptocurrencies, Cambodia’s central bank governor Chea Serey expressed optimism earlier this year about the potential of digital currency to strengthen the Cambodian riel and reduce reliance on the U.S. dollar.
Overall, Cambodia’s recent decision to allow commercial banks and payment firms to provide services related to Category 1 crypto assets represents a significant step towards embracing the benefits of digital currencies. While standalone cryptocurrencies like Bitcoin and Ethereum are still prohibited, the opening up of services for stablecoins and central bank digital currencies indicates a willingness to explore new financial technologies. With the proper regulatory framework in place, Cambodia could potentially leverage digital currencies to improve financial inclusion and reduce reliance on traditional banking systems.
