The National Bank of Cambodia has published a first set of digital asset rules that apply to banks and payment service providers. Banks can have exposure to tokenized assets and qualifying stablecoins, but no first party exposure to cryptocurrencies. Multiple Cambodian news outlets have stated that a ban on cryptocurrencies persists. Our interpretation of the rules is more permissive – that banks can provide cryptocurrency services to clients.
Cambodia’s central bank rules distinguished between banks acting for their own purposes, versus on behalf of a client – as a crypto asset service provider (CASP). In both cases, they require central bank approval. For direct bank exposures, the institutions are restricted to tokenization and stablecoins. However, the clause relating to client services does not mention the same limitation.
There is an additional clause explicitly banning bank engagement with cryptocurrencies, but that is prefaced as relating to “their own crypto-assets”. Hence, the consistency between the two clauses reinforces our conclusion that approved banks may be allowed to provide cryptocurrency services to clients, including custody, on and off ramping, and trading.
Qualifying stablecoins and tokenized securities are classed as ‘group 1’ in much the same way as the Basel Committee divides crypto-assets. Cryptocurrencies are considered riskier and fall into group 2. The document is a first pass at implementing the Basel rules. It put a cap on bank group 1 exposures at 5% of capital, or 3% after hedging.
A payment provider may also qualify as a CASP. The National Bank of Cambodia is banning three activities relating to cryptocurrencies. CASPs may not use client assets for their own purposes, nor can they provide or enable lending services. They are not allowed to advertise a specific cryptocurrency, although they may advertise their own services.
No stablecoins for payments?
The third limitation appears to restrict the use of stablecoins for payments. It says a CASP is prevented from “Acting or providing any service that promotes or provides means for using Crypto assets to pay for goods and services.” It’s not clear whether that’s intentional or whether the target is for domestic payments only.
Stepping back, Cambodia launched the hugely successful blockchain base payment system, Bakong, in 2020. While commonly described as a CBDC, it’s actually closer to a tokenized deposit system. Cambodia is heavily dollarized, so the dollar aspect can’t be a CBDC. Bakong is widely used domestically but has also been integrated with several regional payment systems.
On the one hand, the use of stablecoins could detract from the success of Bakong. However, Bakong’s technology partner Soramitsu was planning to integrate stablecoins with Bakong for international payments. Technically, the Soramitsu plan is not targeting Cambodians, so the stablecoin restriction may not apply.
