The National Bank of Cambodia (NBC) has made a significant shift in its crypto stance, authorizing commercial banks and payment institutions to offer services involving Category 1 crypto assets, such as stablecoins. This move, outlined in a directive issued on December 26, marks the first time the NBC has approved such services.
However, the directive explicitly prohibits unbacked cryptocurrencies like Bitcoin.
Regulating Digital Currencies
The NBC's directive aims to establish a regulatory framework for digital currencies within the Cambodian financial system. Licensed institutions will be permitted to engage in activities like exchanging crypto assets for fiat currencies, transferring crypto assets between accounts, and offering custody services.
Crucially, the directive mandates that these institutions cannot utilize customers' crypto assets for their own purposes.
Shifting Stance After Strict Ban
Historically, Cambodia has maintained a strict stance against cryptocurrencies, citing concerns about fraud, money laundering, and illicit activities. This led to a previous ban on crypto trading and transactions.
However, the growing global adoption of digital currencies and the inherent challenges in regulating decentralized assets have prompted the NBC to reconsider its position.
Economic Researcher's Perspective
Hong Vanak, an economic researcher at the Royal Academy of Cambodia, acknowledged the complexities of regulating cryptocurrencies. While acknowledging limited direct economic benefits for Cambodia, Vanak suggested that banks and institutions offering crypto-related services could generate revenue through user fees.
Recent Crackdown on Crypto Exchanges
Earlier this month, Cambodia blocked access to 16 cryptocurrency exchange websites, including major platforms like Binance and Coinbase. This action, part of a broader crackdown on online gambling sites, targeted platforms operating without a license from the Securities and Exchange Regulator of Cambodia (SERC).
While website access was restricted, mobile applications for these platforms remained accessible.
Limited Licensing and Global Crypto Adoption
Currently, only two companies hold licenses under SERC's "FinTech Regulatory Sandbox" program, allowing them to trade digital assets but prohibiting the exchange of cryptocurrencies for fiat currencies.
Despite these regulatory efforts, Cambodia remains a global leader in retail crypto use per capita, according to Chainalysis. Centralized exchanges account for a significant portion of crypto transactions within the country.
Concerns Regarding Criminal Activities
However, Cambodia faces scrutiny for crypto-related criminal activities. The UN Office of Drugs and Crime has reported the use of cryptocurrencies by criminal organizations in Cambodia for money laundering and dark-web transactions.
Chainalysis identified over $49 billion in crypto transactions between 2021 and mid-2024 facilitated by Huione Guarantee, a marketplace within the Cambodian conglomerate Huione Group.
December 2024, Cryptoniteuae