The National Bank of Cambodia (NBC) has opened new doors for crypto adoption. For the first time, it allows commercial banks and payment institutions to process Category 1 crypto assets, including stablecoins or backed cryptocurrencies. However, NBC still keeps a tight ban on unbacked cryptocurrencies, including Bitcoin.
NBC gave the directive on Dec.26, which was followed by a formal announcement on Dec. 27. The move puts Cambodia in step with what happens around the world, as the country also tries to keep tight control. Decentralized, the cryptocurrencies are increasingly used globally for trading, for payments, and for investments.
The directive actually requires banks and any other payment providers to get approval from NBC before engaging in crypto-related activities. Licensed institutions are allowed to exchange crypto for fiat, move digital assets, or simply provide custody services. However, they use customers’ crypto holdings for their benefit.
Restrictions on using customer crypto holdings
Cambodia has been very conservative about the use of digital currency. Earlier, the country had forbidden crypto transactions, citing risks of fraud, money laundering, and black-market activities. This latest directive is a full turn from that but still replete with stringent measures.
Hong Vanak, an economic researcher at the Royal Academy of Cambodia, pointed out the challenges. He said that while digital currencies are popular worldwide, their volatile nature and decentralized design make it difficult to regulate them.
Vanak also commented that, on the other side, there are problems related to taxation or tracing ownership. Crypto services could make banks more profitable through revenues brought in by users. At a single stroke, NBC won’t change Cambodia’s economic fortunes.
But it signals embracing modern technologies while keeping a watch for their consequence on financial stability. Balancing progress and caution: this is what the country has to do as it takes its first steps in the digital currency world.
