27th December 2024 – (Phnom Penh) The National Bank of Cambodia (NBC) has taken a significant step in the regulation of digital currencies by permitting commercial banks and payment institutions to offer services related to Category 1 crypto assets, specifically backed or stable cryptocurrencies. This landmark decision was outlined in a directive issued on 26th December and publicly announced on 27th December, as reported by the Phnom Penh Post.
This regulatory breakthrough marks the first instance of the NBC allowing such services, although unbacked cryptocurrencies, including Bitcoin, remain strictly prohibited. The directive underscores Cambodia’s commitment to aligning with global financial trends while managing the complexities associated with digital currencies.
Under the new framework, financial institutions must secure prior approval from the NBC before engaging in activities such as exchanging crypto assets for fiat currency, facilitating transfers between crypto accounts, and providing custody services for digital assets. Importantly, these institutions are forbidden from using customers’ crypto assets for their own purposes, ensuring a level of consumer protection.
Historically, Cambodia has adopted a stringent approach towards cryptocurrencies, primarily due to concerns over fraud, money laundering, and other illicit activities. This cautious stance previously resulted in a ban on cryptocurrency trading and transactions.
Hong Vanak, an economic researcher at the Royal Academy of Cambodia, commented on the challenges posed by the growing global acceptance of cryptocurrencies. He noted that their decentralized nature complicates regulation, taxation, and tracking efforts. While he acknowledged that cryptocurrencies offer limited advantages to Cambodia’s economy, Vanak suggested that banks and financial institutions could generate revenue through service fees related to crypto activities.
In a related move earlier this month, Cambodia blocked access to 16 cryptocurrency exchange websites, including prominent platforms such as Binance, Coinbase, and OKX. This action was part of a broader initiative to regulate the digital asset market, following a directive aimed at restricting access to 102 domains, predominantly targeting online gambling sites. The inclusion of crypto exchanges in this crackdown stemmed from their lack of licensing from the Securities and Exchange Regulator of Cambodia (SERC).
Despite these restrictions, mobile applications for these platforms remain operational. Presently, only two companies have obtained licenses under SERC’s “FinTech Regulatory Sandbox” programme, allowing them to trade digital assets while prohibiting exchanges of cryptocurrencies for Cambodia’s legal tender or any other fiat currencies.
Despite regulatory challenges, Cambodia has emerged as a leader in retail crypto usage per capita, according to analytics firm Chainalysis. Centralized exchanges account for approximately 70% of crypto transactions within the country. However, the nation faces scrutiny regarding crypto-related criminal activities, with the UN Office of Drugs and Crime reporting that criminal organisations in Cambodia are utilising cryptocurrencies for money laundering and dark-web transactions. Chainalysis revealed that over $49 billion in crypto transactions occurred between 2021 and mid-2024, facilitated by Huione Guarantee, a marketplace linked to the Cambodian conglomerate Huione Group.
