Cambodia’s Cautious Dance with Crypto: Stablecoins Welcome, Bitcoin and Ether Banned

Cambodia is cautiously venturing into the realm of cryptocurrency, allowing stablecoins under stringent conditions while maintaining a ban on Bitcoin and Ether. On December 27, 2023, the National Bank of Cambodia (NBC) issued a directive that reflects the country’s wariness about financial crime and scams, despite global enthusiasm for digital currencies.

Key Highlights

• Stablecoins are permitted in Cambodia, but Bitcoin and Ether remain banned.
• The NBC’s directive is a response to concerns over money laundering.
• Bakong, the country’s central bank digital currency (CBDC), aims to reduce reliance on the US dollar.
• Challenges include regulatory fears and a lack of public crypto education.

For the first time, the NBC is allowing commercial banks and payment companies to handle stablecoins and other cryptocurrencies tied to actual currencies or commodities. This move is a strategic attempt to balance innovation with regulation, a hallmark of Cambodia’s approach to digital currencies. With a history of tight crypto regulations, the nation seeks to harness digital currency benefits while retaining strict control.

The introduction of Bakong, Cambodia’s own CBDC, in 2020 was designed to reduce dependency on the US dollar and to facilitate digital payments. Despite these efforts, considerable challenges linger, including regulatory concerns, insufficient public education about cryptocurrency risks, and inadequate digital infrastructure, particularly in rural areas.

Historically, Cambodia has been apprehensive about embracing cryptocurrencies because of potential money laundering and scams, which led to the outright ban on Bitcoin and Ether. The decentralized nature of these cryptocurrencies complicates regulation and tracking, potentially enabling financial crimes. Nonetheless, Cambodia ranks among the top 20 globally for retail crypto use per capita, indicating substantial interest and market potential.

Cambodia’s crypto market is projected to generate $8 million in revenue by 2024, pointing to an optimistic outlook even in a stringent regulatory environment. The government has blocked access to 16 major crypto exchanges due to licensing issues, underscoring its commitment to maintaining robust regulations.

As blockchain technology continues to gain global traction, Cambodia is exploring its applications across various sectors such as agriculture, healthcare, and education. This aligns with the country’s broader digital transformation goals, aiming to enhance transparency and efficiency through blockchain capabilities.

What cryptocurrencies has Cambodia permitted, and which remain banned?
Cambodia has permitted stablecoins but continues to ban Bitcoin and Ether.

Why has Cambodia been cautious about adopting cryptocurrencies?
Concerns about money laundering, scams, and regulatory challenges have made Cambodia wary.

What is Bakong, and what purpose does it serve?
Bakong is Cambodia’s central bank digital currency, aimed at reducing reliance on the US dollar and facilitating digital payments.

What challenges does Cambodia face in its crypto adoption efforts?
Challenges include regulatory fears, a lack of public crypto education, and inadequate infrastructure.

Despite these hurdles, blockchain technology is being increasingly explored in Cambodia, with its potential to improve supply chain transparency and enable financial inclusion through decentralized finance (DeFi). The lack of robust digital infrastructure, particularly in rural areas, remains a significant barrier to widespread adoption. Addressing these challenges involves educational programs and partnerships with international blockchain firms, signaling Cambodia’s cautious yet progressive steps into the digital currency arena.