National Bank of Cambodia Embraces Stablecoin Services, Maintains Ban on Unbacked Cryptocurrencies
In a significant stride towards embracing digital currencies, the National Bank of Cambodia (NBC) has officially sanctioned the provision of stablecoin services by commercial banks and payment institutions. However, in a move that underscores caution, the bank continues to prohibit the use of unbacked cryptocurrencies such as Bitcoin.
Understanding the New Directive
The recent directive, formally introduced in a prakas on December 26 and publicized by NBC on December 27, marks a pivotal shift in Cambodia’s approach to digital currencies. As reported by The Phnom Penh Post, this directive is part of a broader initiative to align the country’s financial operations with global digital financial trends while ensuring robust regulatory oversight.
Permitted Crypto Services
Under the new guidelines, commercial banks and payment institutions wishing to engage in crypto-related services must first secure approval from NBC. Once authorized, these institutions can participate in various activities, including exchanging cryptocurrencies for traditional fiat currencies, facilitating the transfer of digital assets between accounts, and offering custody services for crypto holdings. Importantly, the directive strictly forbids these institutions from utilizing customers’ cryptocurrency assets for their own operational purposes.
Historical Context of Cryptocurrency in Cambodia
Historically, Cambodia has maintained a cautious stance toward cryptocurrency transactions and trading, primarily due to the potential risks associated with such activities. The concerns have centered around issues like money laundering, fraud, and the use of cryptocurrencies for illicit activities on the black market. These apprehensions have necessitated a careful and measured approach to integrating digital currencies into the national economy.
The Global Perspective on Cryptocurrencies
Economic researcher Hong Vanak of the Royal Academy of Cambodia has highlighted the increasing global popularity of cryptocurrencies. These digital assets are not only being used for payment purposes but are also actively traded like stocks, owing to their volatile nature. Unbacked cryptocurrencies, in particular, exhibit significant price fluctuations, making them both attractive and risky investment options.
Economic Implications for Cambodia
Vanak has expressed skepticism regarding the economic benefits that cryptocurrencies could bring to Cambodia. Their decentralized and digital nature poses challenges for regulation, taxation, and ownership tracking, potentially limiting their positive impact on the national economy. Nonetheless, he acknowledges that commercial banks and financial institutions offering crypto services have the potential to generate revenue through service fees, providing a new stream of income in the evolving financial landscape.
Conclusion
The National Bank of Cambodia’s decision to permit stablecoin services while continuing to ban unbacked cryptocurrencies reflects a balanced approach to digital currency adoption. By fostering a regulated environment for stablecoin transactions, Cambodia aims to embrace financial innovation while safeguarding its economic interests. As the global financial landscape continues to evolve, Cambodia’s measured steps in the realm of digital currencies position it to participate in the growing digital economy while mitigating associated risks.
