Cambodia Allows Stablecoin Services with NBC Approval, While Bitcoin Remains Prohibited

Cambodia has taken a significant step in the cryptocurrency domain with the National Bank of Cambodia (NBC) announcing that commercial banks and payment institutions will be permitted to offer services related to Category 1 crypto assets, subject to NBC approval. These crypto assets are defined as secured or stable cryptocurrencies, such as stablecoins. Notably, however, unsecured cryptocurrencies, including Bitcoin, remain prohibited.

The NBC disclosed the decision in a prakas issued on December 26, which governs the use of digital currencies in the country. This move highlights Cambodia's efforts to integrate digital currencies within its financial system, while addressing concerns regarding security and regulation.

Cryptocurrencies, also known as digital currencies, are not controlled by central banks and instead operate through decentralized networks called blockchains. These currencies have gained traction worldwide and are used for trading, transfers, payments, and investments, enabling users to purchase goods and services online.

Commercial Banks Permitted to Offer Crypto Services in Cambodia

The new directive mandates that any commercial bank or payment institution seeking to provide cryptocurrency services must obtain approval from the National Bank of Cambodia. Upon receiving authorization, these institutions will be permitted to trade crypto assets for fiat currencies.

Furthermore, they can transfer crypto tokens between accounts and provide custody services, but they are prohibited from utilizing customers' crypto assets for their own benefit.

It's important to note that Cambodia previously banned cryptocurrency transactions and trading, with the government citing concerns over the high risks of money laundering, fraud, and activities in the black market.

An economic researcher at the Royal Academy of Cambodia, Hong Vanak, highlighted the expanding role of cryptocurrencies, which are now used not only for payments but also for other purposes. Given their volatile prices, they are also traded like stocks. However, Vanak noted that cryptocurrencies contribute little to Cambodia's economy due to their decentralized nature, which makes them difficult for the government to tax, regulate, or track ownership.

Despite these challenges, Vanak stated that banks and crypto service providers could still generate profits by offering exchange and custody services, which would allow them to collect revenue through user fees.

In conclusion, the NBC has opened the door to stablecoin services in Cambodia, while Bitcoin and other unbacked cryptocurrencies are still banned. This marks a significant step as Cambodia integrates digital currencies into its financial system.