Cambodia authorizes banks to handle Category 1 crypto assets, balancing innovation with strict oversight as the nation shifts cryptocurrency policy amid growing digital adoption.
After years of caution regarding cryptocurrencies due to their potential risks, the Cambodian government is finally stepping into the emerging economy. On Friday, the National Bank of Cambodia (NBC) issued a directive allowing commercial banks and payment institutions to offer services involving Category 1 crypto assets, marking a major policy shift for the nation.
The announcement, formalized through a directive on December 26, enables the approved institutions to engage in activities such as exchanging cryptocurrencies for fiat, transferring crypto assets, and providing custody services. However, unbacked cryptocurrencies like Bitcoin BTC $94 083 24h volatility: 1.9% Market cap: $1.86 T Vol. 24h: $50.74 B and Ethereum ETH $3 308 24h volatility: 0.9% Market cap: $399.01 B Vol. 24h: $25.43 B remain explicitly prohibited under the new framework.
For clarity, category 1 crypto assets, as defined by NBC, include backed or stable cryptocurrencies that maintain a fixed value tied to reserve assets such as USDT $1.00 24h volatility: 0.0% Market cap: $139.20 B Vol. 24h: $61.02 B and USDC $1.00 24h volatility: 0.1% Market cap: $43.53 B Vol. 24h: $7.83 B . This distinction aims to mitigate the risks of volatility and illicit use that have historically been associated with cryptocurrencies like Bitcoin and Ethereum, the central bank said.
The new directive outlined clear operational guidelines for financial institutions looking to enter the crypto space. Under the rule, institutions must obtain prior approval from NBC before engaging in any crypto-related activities.
Authorized entities are permitted to facilitate the exchange of backed crypto assets, enable account-to-account transfers, and store crypto assets on behalf of customers.
However, the directive strictly prohibits financial institutions from using customers’ crypto assets for their own purposes, ensuring consumer protection and preventing misuse.
The move is part of Cambodia’s attempt to balance the benefits of financial innovation with the need for strict oversight to mitigate risks such as fraud, money laundering, and black-market activities.
Before now, Cambodia had maintained a historically skeptical view of cryptocurrencies, banning transactions and trading in previous years due to their association with high risks and market volatility.
Earlier this month, the country’s financial regulator blocked access to 16 digital asset trading platforms including major players like Binance, Coinbase, and OKX.
According to the Telecommunication Regulator of Cambodia (TRC), these companies offered services to users within the nation without obtaining proper license from the Securities and Exchange Regulator of Cambodia (SERC).
Currently, only two crypto exchanges are fully authorized to operate within the nation.
Meanwhile, speaking on the latest approval of commercial banks to engage with stablecoins, economic researcher Hong Vanak of the Royal Academy of Cambodia highlighted the increasing global adoption of cryptocurrencies for payments, trading, and investment.
However, he argued that their decentralized nature poses challenges for national economies, particularly in areas such as regulation, taxation, and ownership tracking.
Despite these concerns, Vanak acknowledged that financial institutions offering crypto services could generate revenue through user fees, creating a new income stream for the sector.
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Chimamanda is a crypto enthusiast and experienced writer focusing on the dynamic world of cryptocurrencies. She joined the industry in 2019 and has since developed an interest in the emerging economy. She combines her passion for blockchain technology with her love for travel and food, bringing a fresh and engaging perspective to her work.
