Cambodia Central Bank Approves Crypto Services

The National Bank of Cambodia (NBC) has made a significant move by granting commercial banks and payment firms permission to provide cryptocurrency-related services for the first time. However, the new regulations come with strict limitations, excluding Bitcoin, Ethereum, and other unbacked cryptocurrencies from the approved list.

On December 27, NBC formally announced that banks and payment firms can now handle transactions involving Category 1 crypto assets, which include cryptocurrencies backed by fiat currencies. This category primarily covers stablecoins such as USD Coin (USDC), Tether (USDT), and central bank digital currencies (CBDCs).

These authorized institutions can convert crypto into fiat currencies and vice versa, facilitate crypto transfers between accounts, and provide custody services for digital assets. However, all commercial banks and payment firms must first obtain approval from the NBC before launching these services. Furthermore, financial institutions are prohibited from using clients' crypto assets for their benefit, ensuring additional safeguards for users.

Bitcoin and Other Cryptocurrencies Still Prohibited

Despite this progressive step, Cambodia remains cautious about standalone cryptocurrencies like Bitcoin and Ethereum. These assets, known for their high volatility and decentralized nature, continue to be prohibited under NBC’s guidelines. The ban reflects lingering concerns over the risks associated with unregulated virtual assets, including their potential use in illicit activities such as money laundering and fraud.

The NBC’s decision represents a significant policy shift, as Cambodia previously banned its citizens from engaging in cryptocurrency transactions or trading. The initial prohibition stemmed from fears of market instability and the misuse of crypto in illegal activities.

This recent development signals a cautious but clear pivot toward embracing blockchain technology and digital currencies, aligning Cambodia with the global trend observed in countries like the U.S., UAE, and Hong Kong. However, Cambodia’s crypto adoption remains in its early stages compared to these nations, as the government continues to exercise strict oversight.

Earlier this month, Cambodia reinforced its cautious approach by blocking 16 major crypto exchanges, including Binance, OKX, and Coinbase. These platforms failed to secure the necessary licenses from Cambodia’s Securities and Exchange Regulator, rendering them ineligible to operate within the country. The crackdown underscores the government’s commitment to maintaining regulatory control over the burgeoning crypto sector.

Looking Ahead: A Digital Currency Future

While Cambodia is taking incremental steps toward integrating digital currencies, the focus remains on stablecoins and CBDCs. In May, NBC Governor Chea Serey expressed optimism about the potential of digital currencies to strengthen the Cambodian riel and reduce reliance on the U.S. dollar. By prioritizing fiat-backed digital assets, Cambodia aims to bolster its monetary system while minimizing the risks associated with speculative cryptocurrencies.

This landmark decision marks a cautious but deliberate entry into the crypto ecosystem, offering banks and payment firms new opportunities while maintaining strict regulatory safeguards. As Cambodia continues to explore the digital currency landscape, its gradual embrace of blockchain technology could pave the way for broader crypto adoption in the years to come.