Cambodia Allows Banks to Provide Crypto-Related Services, but Not for Bitcoin and Other Unbacked Tokens

The National Bank of Cambodia has given commercial banks and payment firms permission to provide crypto-related services, but not for Bitcoin and other unbacked tokens.

Cambodia’s central bank has authorized commercial banks and payment firms to offer crypto-related services, but only for a select category of crypto assets.

According to a report by the Phnom Penh Post on Dec. 28, the National Bank of Cambodia (NBC) announced on Dec. 27 that it will permit banks to provide services related to Category 1 crypto assets.

This category includes cryptocurrencies that are pegged to fiat currencies, such as stablecoins like USD Coin (USDC) and USDT (USDT), as well as central bank digital currencies.

However, the new regulation does not extend to Bitcoin (BTC), Ethereum (ETH) and other unbacked cryptocurrencies, which remain banned in Cambodia.

Under the new law, commercial banks and payment firms that intend to offer crypto-related services must first obtain approval from the central bank.

Once authorized, banks and payment institutions will be able to convert crypto into fiat currencies and vice versa. They will also be permitted to facilitate cryptocurrency transfers between accounts and provide custody services.

However, financial institutions are strictly prohibited from utilizing client crypto assets for their own gain.

Prior to the NBC announcement, Cambodia had prohibited its citizens from engaging in crypto transactions or trading cryptocurrencies, owing to the high volatility associated with virtual assets and the widespread perception that crypto facilitates illicit activities such as money laundering and fraud.

This landmark move by the NBC signals Cambodia's gradual shift towards the crypto industry, following a global trend observed in countries such as Hong Kong, the U.S. and UAE. However, in comparison to these countries, Cambodia is still in the early stages of crypto adoption.

Earlier this month, Cambodia blocked 16 major crypto exchanges, including Binance, OKX and Coinbase, from operating in the country. The exchanges failed to secure licenses from Cambodia’s Securities and Exchange Regulator, which are required for operating in the country.

While Cambodia remains cautious towards cryptocurrencies as a whole, the nation appears to be pivoting towards digital currencies that are pegged to fiat. In May, National Bank of Cambodia governor Chea Serey expressed optimism that digital currency could strengthen the Cambodian riel and reduce reliance on the U.S. dollar.