For the first time ever, the National Bank of Cambodia (NBC) has opened the door for commercial banks and payment institutions to provide services involving Category 1 crypto assets, such as backed or stable cryptocurrencies. However, cryptocurrencies like Bitcoin, which lack backing, remain prohibited. This groundbreaking development was formalized in a prakas issued on December 26 and announced by NBC on December 27.

The new directive aims to regulate digital currency operations, aligning Cambodia with global financial innovations.

What are Cryptocurrencies?

Cryptocurrencies are digital assets not controlled by central banks but operate on decentralized computer networks called blockchains. They're widely used for trading, transfers, payments, and investments in goods and services through digital platforms.

New Opportunities for Banks and Payment Institutions

Under this directive, any commercial bank or payment institution wishing to offer crypto-related services must first get approval from NBC. Once authorized, they can exchange crypto assets for fiat currencies, transfer crypto assets between accounts, and provide custody services. However, they cannot use their customers' crypto assets for their purposes.

Cambodia's Cautious Approach

Historically, Cambodia banned cryptocurrency transactions due to high risks, such as money laundering and fraud. Economic researcher Hong Vanak from the Royal Academy of Cambodia highlighted that while cryptocurrencies are globally popular and often used for payments and trading, they offer limited benefits to Cambodia's economy. This is due to their digital and decentralized nature, which complicates regulation and taxation. However, authorized institutions can generate revenue through user fees.

This move marks a significant shift in Cambodia's approach to digital currencies, potentially paving the way for further financial innovations.

Stay tuned for more updates as Cambodia steps into the future of digital finance! 🚀