The National Bank of Cambodia (NBC) allows financial institutions to provide services related to collateralized 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 cryptocurrencies, specifically collateralized or stablecoin cryptocurrencies.
This new regulation reflects Cambodia's efforts to embrace global financial innovation, while maintaining control over uncollateralized cryptocurrencies such as Bit, which remain on the banned list.
New legal framework for collateralized cryptocurrencies
NBC's guidelines focus on managing activities and businesses related to digital currencies. Accordingly, financial institutions wishing to participate in this market must obtain prior approval from NBC. Once licensed, they can perform services such as exchanging collateralized cryptocurrencies for fiat currency, transferring cryptocurrency assets between accounts, and providing custody services. However, the use of customer cryptocurrency assets for the institution's own purposes is strictly prohibited.
This decision marks a significant shift in Cambodia's stance on cryptocurrencies. Previously, the country had completely banned cryptocurrency transactions due to concerns about money laundering, fraud, and other illegal activities in the dark market. The focus on collateralized cryptocurrencies reflects NBC's cautious approach, aiming to mitigate these risks while still allowing access to new technologies.
The global development of cryptocurrencies, both in terms of payments and investments, has prompted Cambodia to reconsider its policies. According to Heng Vanak, an economic researcher at the Royal Academy of Cambodia, cryptocurrencies, particularly uncollateralized ones, are increasingly being traded like stocks due to their high volatility.
However, he also noted the limitations of cryptocurrencies for the national economy. Their digital and decentralized nature makes management, taxation, and ownership tracking more complex.
Nevertheless, allowing commercial banks and institutions to provide services related to collateralized cryptocurrencies may create new revenue streams through service fees. This is a cautious step by Cambodia to balance the opportunities presented by new financial technologies and the management of inherent risks.
