Cambodia Approved Commercial Banks to Offer Bitcoin and Crypto Services

The National Bank of Cambodia (NBC) has taken a significant step towards integrating cryptocurrencies into its financial system. On December 26, 2024, it issued a prakas, which permits commercial banks and payment institutions to offer services related to a specific category of digital assets.

The directive, announced on December 27, 2024, focuses specifically on Category 1 crypto assets – those backed by underlying assets or operating as stablecoins. This carefully curated approach excludes unbacked cryptocurrencies, such as Bitcoin, which remain prohibited within the Cambodian financial landscape.

Cambodia National Bank Embraces Cryptocurrency

The move reflects Cambodia’s proactive engagement with global financial trends. The increasing ubiquity of cryptocurrencies, used globally for transactions, payments, investments, and trading, necessitates a considered response from national regulatory bodies.

However, NBC’s directive aims to provide a framework for the responsible integration of these assets, fostering innovation while upholding financial stability and security.

Under the new regulations, any commercial bank or payment institution seeking to offer crypto-related services must first secure prior approval from the NBC. Authorized institutions will be permitted to engage in activities such as fiat-cryptocurrency exchange, inter-account crypto transfers, and the provision of crypto asset custody services.

Additionally, a critical safeguard incorporated into the directive is the explicit prohibition against institutions utilizing their clients’ crypto assets for their purposes, thereby protecting customer funds and reinforcing fiduciary responsibilities.

Changes in Governmental Stance Toward Cryptocurrencies

Previous prohibitions stemmed from valid concerns regarding the potential for money laundering, fraud, and illicit activities facilitated by the cryptocurrency market’s decentralized and often opaque nature. The decision to allow limited access, therefore, reflects a careful evaluation of the risks and benefits, prioritizing responsible regulation over outright prohibition.

Hong Vanak, an economic researcher at the Royal Academy of Cambodia, acknowledges the burgeoning global adoption of cryptocurrencies, noting their use not only for transactions but also as speculative assets, particularly unbacked cryptocurrencies subject to significant price volatility. However, Vanak highlights the limitations of cryptocurrencies’ contribution to the Cambodian national economy.

These assets’ decentralized and digital nature presents challenges to regulation, taxation, and the tracking of ownership, potentially hindering their integration into the mainstream economy. Nevertheless, he recognizes the revenue-generating potential for commercial banks and institutions through user fees associated with providing crypto-related services.