- Cambodia’s central bank allows regulated banks to offer stablecoin services, emphasizing compliance and prohibiting client asset misuse.
- Chainalysis ranks Cambodia among the top 20 nations for crypto transactions despite strict regulatory prohibitions.
The National Bank of Cambodia (NBC) has announced a regulatory framework allowing commercial banks and financial institutions under its supervision to provide services involving stablecoins.
According to the NBC’s statement, the framework aims to regulate stablecoin operations within Cambodia’s financial system. Stablecoins, such as USDT and USDC, are digital tokens pegged to fiat currencies like the US dollar, offering relative price stability compared to other cryptocurrencies.
Institutions seeking to offer stablecoin-related services must first obtain formal approval from the central bank. Moreover, banks are prohibited from using client-held digital assets for proprietary purposes.
Cryptocurrency Ban Continues
Despite this regulatory progress for stablecoins, Cambodia enforces a strict ban on transactions involving cryptocurrencies like Bitcoin (BTC) and other decentralized assets. Officials cite concerns over money laundering, fraud, and illegal market activities as reasons for the continued restrictions.
Economic researcher Hong Vanak of the Royal Academy of Cambodia has stated that cryptocurrencies provide limited economic benefits due to their decentralized nature, complicating management, taxation, and ownership tracking.
High Local Crypto Activity Despite Restrictions
Interestingly, Cambodia ranks among the top 20 countries globally for cryptocurrency transactions, as reported by Chainalysis. This underscores a significant disconnect between the country’s regulatory stance and local adoption levels.
Despite the ban, digital assets continue to attract interest within the Cambodian market, reflecting broader global trends in cryptocurrency utilization.
Outlook for Cambodia’s Digital Asset Policies
The introduction of a regulated stablecoin framework may enhance financial system efficiency and increase adoption among institutional players. However, the continued prohibition on cryptocurrencies reflects the government’s cautious stance on decentralized assets, prioritizing financial stability and regulatory control.
The National Bank of Cambodia (NBC) has for the first time allowed commercial banks and payment institutions to provide services involving Category 1 crypto assets, including secured or stablecoins, but unsecured cryptocurrencies such as Bitcoin remain prohibited.…
— Wu Blockchain (@WuBlockchain) December 27, 2024
Cambodia’s approach highlights the tension between embracing financial innovation and mitigating associated risks.
Potential Delisting of USDT in the EU Raises Regulatory and Market Questions
The upcoming implementation of the Markets in Crypto-Assets Regulation (MiCAR) in the European Union has sparked discussions around the potential delisting of Tether (USDT), one of the largest stablecoins by market capitalization.
MiCAR, which aims to standardize rules for crypto-asset service providers across the EU, will come into full effect on December 30, 2024, with partial regulations applied starting June 2024.
MiCAR introduces stricter compliance standards, focusing on transparency and reserve requirements for stablecoins. While USDT is backed by reserves in US dollars and other fiat currencies, its alignment with MiCAR standards remains unclear.
As a result, the delisting of USDT in European markets is being considered. This scenario could lead to a shift toward euro-backed stablecoins, as they would align more directly with the regulatory framework.
Global Ripple Effect
Experts suggest that the United States may adopt similar regulatory measures following Europe’s lead. The potential alignment between US and EU policies could further impact the global stablecoin market, particularly for dollar-pegged assets like USDT. Tether’s position in the market may face increased pressure as regulators emphasize compliance and market stability.
Alternative Solutions
In light of these developments, analysts have begun exploring alternatives for users reliant on USDT. Options include transitioning to euro-backed stablecoins, which may gain traction within the EU due to their regulatory compatibility.
Additionally, decentralized stablecoins could provide another avenue for users seeking alternatives to centralized assets.
