Cambodia Sets New Limits on Bank Engagement with Tokenised Assets and Stablecoins

Cambodia's Central Bank Introduces New Rules for Digital Assets

In a move to regulate the expanding crypto landscape, the National Bank of Cambodia (NBC) has released its initial set of rules governing digital assets for banks and payment service providers.

The new regulations distinguish between tokenised assets, qualifying stablecoins, and cryptocurrencies, setting the stage for how financial institutions can engage with these digital assets.

Banks’ Engagement Limited to Tokenised Assets and Stablecoins

Under the new guidelines, Cambodian banks are allowed exposure to tokenised assets and stablecoins but are prohibited from directly holding cryptocurrencies.

The central bank's directive specifies that institutions can engage with tokenised securities and stablecoins categorised as 'Group 1' assets, akin to the Basel Committee’s classification of safer digital assets.

Group 1 assets include tokenised traditional assets and stablecoins with robust stabilisation mechanisms.

The NBC has set exposure caps at 5% of Common Equity Tier 1 (CET1) Capital for tokenised assets and 3% for stablecoins.

Can Banks Provide Crypto Services to Clients?

Interestingly, while banks cannot have direct exposure to cryptocurrencies for their own purposes, the rules for client-related services appear more permissive.

Banks acting on behalf of clients as Crypto Asset Service Providers (CASPs) must obtain approval from the central bank.

The regulation does not explicitly restrict banks from offering cryptocurrency-related services such as custody, trading, and on/off ramping for clients, suggesting a potential avenue for client engagement with crypto assets.

Prohibition on Cryptocurrency Lending and Promotion

The NBC has laid out specific restrictions for CASPs.

These providers cannot use client assets for their purposes, offer lending services involving crypto assets, or advertise specific cryptocurrencies.

However, they can promote their services in general, provided they do not directly encourage the use of cryptocurrencies for payments.

Stablecoin Use in Payments Remains a Grey Area

The rules also touch on the use of stablecoins in payments, stating that CASPs should not provide services that enable crypto assets to be used for buying goods and services.

It remains unclear whether this restriction targets all payment uses or primarily domestic ones.

This ambiguity could impact the integration plans of stablecoins with the blockchain-based payment system Bakong, which has gained significant traction since its launch in 2020.

Heavy Fines for Non-Compliance

The NBC has imposed stringent penalties for non-compliance with the new regulations.

Entities breaching these rules could face fines up to KHR 500,000,000 per violation, alongside daily fines for reporting failures and broader non-compliance issues.

Banks that exceed exposure limits or engage in unauthorised activities are also subject to these penalties.

These measures, the central bank asserts, are designed to safeguard the financial system, protect consumers, and mitigate risks such as money laundering and cyber threats, marking a significant regulatory step in Cambodia’s approach to the burgeoning digital asset space.