National Bank of Cambodia Clarifies: Crypto Transactions Remain Banned for Banks

The National Bank of Cambodia has declared that banks and financial institutions are strictly prohibited from engaging in any transactions involving cryptocurrencies. In response to a recent report, the NBC clarified that it is not considering allowing banks to handle stablecoins like Tether or USD Coin due to their failure to meet regulatory criteria. The NBC emphasizes that a draft Prakas currently under consultation outlines strict requirements for stablecoins, differentiating them from popular options like Tether and USD Coin.

National Bank of Cambodia Clarifies Stance on Cryptocurrencies and Banks

Phnom Penh, Cambodia - The National Bank of Cambodia (NBC) has unequivocally stated that it does not currently permit banks or financial institutions to conduct any transactions involving cryptocurrencies. This clarification was issued in response to a recent report published in Khmer Times titled, "NBC mulls allowing banks to deal with crypto assets."

The NBC emphasized that the Khmer Times report inaccurately referred to the potential future engagement of banks with stablecoins such as "Tether (USDT), USD Coin (USDC), and other potentially land-backed tokens." The central bank stressed that it will not authorize banks or financial institutions to deal with Tether or USD Coin as they do not meet the NBC's established criteria.

In its official statement, the NBC explained its classification of crypto assets into two groups: Group 1 (1a and 1b) and Group 2. Group 1b, which encompasses stablecoins, is subject to stringent criteria, according to the NBC. Stablecoins must meet all requirements for effective stabilization mechanisms, including passing a redemption risk test. The statement highlighted that Tether and USD Coin fail to meet these criteria, as they lack regulated or permissioned ledgers.

The NBC recently organized a preliminary consultation session with deposit-taking banks, financial institutions, and payment service providers (PSIs) to discuss a draft Prakas (regulation) on Commercial Banks and Payment Service Providers' Activities Related to Cryptoassets. The meeting's purpose was to solicit feedback and input on the potential conditions under which banks and PSIs could be authorized to conduct limited activities involving crypto assets and related instruments. The NBC emphasized that it is not currently permitting any transactions related to crypto assets within the banking system due to concerns about potential risks to financial stability.

The draft Prakas aims to define the conditions for commercial banks and PSIs to participate in the crypto asset sector while ensuring the safety and soundness of the financial system. It also outlines the conditions under which crypto asset service providers (CASPs) may be authorized to provide payment and remittance services.

The NBC has categorized Group 1 crypto assets into two subcategories, 1a and 1b. Group 1a includes tokenized traditional assets, such as tokenized bonds and security tokens. The NBC believes that the regulation of Group 1a crypto assets can contribute to innovation and facilitate capital market development. However, the NBC's classification restricts the use of permissioned blockchains for these assets.

The Khmer Times article also suggested that the NBC's classification of crypto assets may overlap with the Securities and Exchange Regulator of Cambodia's (SERC) jurisdiction. In response, the NBC clarified that it will collaborate with the SERC, which is the alternate authority licensing crypto asset exchanges/platforms, in regulating these services.

The NBC reiterated that it currently prohibits all banks and PSIs under its supervision from engaging in crypto asset-related activities. In the future, the NBC plans to regulate certain crypto assets that meet the criteria outlined in the draft Prakas to foster innovation in the digital economy while safeguarding financial stability.

The NBC urged the public and the banking community to note that the Prakas is still in its initial draft stage. Further consultations and discussions will be held before the finalization and implementation of the regulation.